The Financial Services Bill received its first reading in the House of Commons today. The Bill's second reading is provisionally scheduled for 30 November. A copy of the Bill as introduced at first reading is available here (html) and here (pdf). Explanatory notes are available here (html) and here (pdf). The Bill contains 19 clauses, arranged as follows:- The Council for Financial Stability (clauses 1, 2, 3 and 4).
- The objectives of the Financial Services Authority (clauses 5, 6, 7 and 8).
- The remuneration of executives of authorised persons (clauses 9, 10 and 11).
- Recovery and resolution plans (clause 12).
- Short selling (clause 13).
- The FSA's disciplinary powers (clauses 14, 15, 16 and 17).
- Collective proceedings (clauses 18 and 19).
The clauses concerning remuneration have attracted widespread attention. Clause 9 gives the Treasury the power to make regulations (a form of secondary legislation) regarding the preparation, approval and disclosure of executives' remuneration reports.
Clause 11 will amend the Financial Services and Markets Act (2000) through the insertion of new section 139A. Section 139A will require the Financial Services Authority to impose on authorised firms the obligation to have, and to act in accordance with, a remuneration policy. This remuneration policy must be consistent with the effective management of risks and the Implementation Standards for Principles for Sound Compensation Practices issued by the Financial Stability Board on 25 September 2009. Where a remuneration policy is not consistent with these requirements, Section 139A(7) states that the FSA "must take such steps as it considers appropriate to deal with the failure" and in this regard it is specifically given the power to require changes in the remuneration policy.
Section 139A(9) provides that the FSA's rules on remuneration may prohibit individuals from receiving certain types of remuneration, with agreements in contravention of this prohibition being void.
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