Regulation 42 Conduct rules for other persons authorised to bid on behalf of others

(1)

This regulation applies to persons authorised to bid pursuant to regulation 16(2).

(2)

Persons referred to in paragraph (1) must apply the following conduct rules in their relationship with their clients—

(a)

they must accept instructions from their clients on comparable terms;

(b)

they must refuse to bid on behalf of a client if they have reasonable grounds to suspect money laundering, terrorist financing, other criminal activity or market abuse, subject to sections 327, 328, 329 and 338(3) of the Proceeds of Crime Act 2002^f1 and section 21A of the Terrorism Act 2000^f2;

(c)

they may refuse to bid on behalf of a client if they have reasonable grounds to suspect that the client is unable to pay for the allowances for which it is seeking to bid;

(d)

they must enter into a written agreement with their clients which—

(i)

does not impose any unfair conditions or restrictions on the client concerned, and

(ii)

provides for all the terms and conditions relating to the services offered including in particular payment and delivery of the allowances;

(e)

they may require their clients to make a deposit by way of advance payment for allowances;

(f)

they may not unduly limit the number of bids that a client might submit;

(g)

they may not prevent or restrict their clients from engaging the services of other entities eligible pursuant to regulation 16(1)(b) to (e) and (2) to bid on their behalf in the auctions;

(h)

they must pay due regard to the interests of their clients who request them to submit bids on their behalf in the auctions;

(i)

they must treat clients fairly and without discrimination;

(j)

they must maintain adequate internal systems and procedures to process requests from clients to act as agent in an auction and to be able to participate effectively in an auction in particular with regard to the submission of bids on behalf of their clients, collect payment and collateral from and transfer allowances to clients for whom they act;

(k)

they must prevent the disclosure of confidential information from that part of their business responsible for receiving, preparing and submitting bids on behalf of their clients to that part of their business responsible for preparing and submitting bids on their own account or to that part of their business responsible for dealing on their own account on the secondary market;

(l)

they must keep records of information obtained or created in their role as intermediaries handling bids on behalf of their clients in the auctions, for five years from the date of obtaining or creating the information concerned.

(3)

The amount of the deposit referred to in paragraph (2)(e) must be calculated on a just and reasonable basis.

(4)

The method of calculating the deposit referred to in paragraph (2)(e) must be set out in the agreements entered into pursuant to paragraph (2)(d).

(5)

Any part of the deposit referred to in paragraph (2)(e) not used to satisfy payment for allowances must be refunded to the payee within a reasonable period after the auction as stated in the agreements entered into pursuant to paragraph (2)(d).

(6)

Persons referred to in paragraph (1) must apply the following conduct rules when bidding on their own account or on behalf of their clients—

(a)

they must provide any information requested by any auction platform where they are admitted to bid to fulfil its functions under these Regulations;

(b)

they must act with integrity, reasonable skill, care and diligence.

(7)

The FCA is responsible for authorising such persons to carry out the activities referred to in paragraph (1) and for monitoring and enforcing compliance with the conduct rules provided for in paragraphs (2) to (6) including the handling of any complaints made for non-compliance with such conduct rules.

(8)

The FCA may only grant an authorisation to the persons referred to in paragraph (1) where the persons fulfil all of the following conditions—

(a)

they are of sufficiently good repute and sufficiently experienced to ensure proper respect of the conduct rules provided for in paragraphs (2) to (6);

(b)

they have put in place the necessary processes and checks to manage conflicts of interest and serve the best interests of their clients;

(c)

they comply with the requirements of the Money Laundering Regulations;

(d)

they comply with any other measures deemed necessary having regard to the nature of the bidding services being offered and the level of sophistication of the clients in question in terms of their investor or trading profile as well as any risk-based assessment of the likelihood of money laundering, terrorist financing or other criminal activity.

(9)

The FCA must monitor and enforce the conditions listed in paragraph (8).

(10)

Clients of bidders referred to in paragraph (1) may direct any complaints that they may have with regard to compliance with the conduct rules provided for in paragraphs (2) to (6) to the FCA.

(11)

Persons referred to in paragraph (1) that are admitted to bid at an auction platform pursuant to regulations 16, 17 and 18 may provide bidding services to clients referred to in regulation 17(3)(a).

Annotations

Footnotes

f1: 2002 c. 29. Sections 327, 328 and 329 have been amended by ss. 102 and 103 of the Serious Organised Crime and Police Act 2005 (c. 15). Section 338(3) has been amended by s. 106(6) of that Act, and S.I. 2007/3398.
f2: 2000 c. 11. Section 21A was inserted by paragraph 5 of Schedule 2 to the Anti-Terrorism, Crime and Security Act 2001 (c. 24), and amended by paragraph 128 of Schedule 4 to the Serious Organised Crime and Police Act 2005, paragraph 72 of Schedule 8 to the Crime and Courts Act 2013 (c. 22), and S.I. 2007/3398