Chapter 3: Accountability of regulators FCA and PRA powers to make rules etc Section 32: Effect of rules etc on deference decisions
This section amends FSMA 2000 by inserting a new section 409A, requiring the FCA and the PRA to consider the effect of a relevant action on notified HM Treasury deference decisions and consult HM Treasury if it considers there to be a material risk that the action would be incompatible with a notified deference decision.
	Subsection (1) outlines that this mechanism will apply only in scenarios where the FCA and the PRA propose to take a "relevant action".
	Subsection (2) requires the PRA or the FCA to consider the effect of the relevant action on notified deference decisions. If the PRA or the FCA considers there is a material risk that the action would be incompatible with a notified decision, it must consult HM Treasury about the likely effect of the action on the decision.
	Subsection (3) limits the requirements in subsection (2) to situations where the PRA or the FCA proposes to take a relevant action, and a duty to consult publicly applies in respect of the action. Subsection (6) provides that a "duty to consult" (publicly) for the purposes of subsection (3) means i) a duty imposed by sections 138I or 138J FSMA 2000 to publish draft rules, or ii) any other duty to publish the proposal to take the action- examples of (ii) include duties under common law, or a statutory requirement under Article 42(3) of Regulation (EU) No 600/2014 of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Regulation (EU) No 648/2012 (Retained EU Legislation). If there is no duty to consult as defined in subsection (6), which includes circumstances where the FCA or the PRA are relying on an exemption from the duty to consult, the test in subsection (3) is not satisfied. Examples of such exemptions applicable to the regulator include section 138L FSMA 2000 (Consultation: general exemptions) and Article 42(4) of Regulation (EU) No 600/2014 of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Regulation (EU) No 648/2012 (Retained EU Legislation). Note that the treatment of the exemption in section 138M(1) of FSMA 2000 (consultation: exemptions for temporary product intervention rules) has been modified for the purposes of new section 409A.
	Subsection (4) defines what constitutes a "relevant action" under this section. These are if the PRA or the FCA proposes to make rules under FSMA 2000 or any other enactment, or make changes to its general policies and practices relating to their respective supervisory remits.
	Subsection (5) defines key concepts for the purposes of the requirement outlined in subsection (2).
	Subsection (6) defines the "duty to consult" test set out in subsection (3).
	Subsection (7) states that section 138M(1), which is the FCA’s exemption relating to temporary product intervention rules, should be ignored for the purposes of assessing whether there is a "duty to consult" for the purposes of subsection (6). Subsection (7) should be read alongside subsections (9)(a) and (10) which introduce a narrower exception from the requirement in subsection (2) in relation to product intervention rules for the purposes of new section 409A.
	Subsection (8) requires the PRA or the FCA, when fulfilling the consultation requirement outlined in subsection (2), to consult HM Treasury prior to consulting publicly.
	Subsection (9) creates certain exceptions to the requirement in subsection (2). The requirement in subsection (2) does not apply when there is an existing duplicative requirement elsewhere in FSMA 2000. Subsection (9) further exempts the regulator from the requirement where the proposed action has been undertaken to comply with a direction given by the Financial Policy Committee of the Bank of England or to act in accordance with a recommendation made by the same committee.
	Subsection (10) provides the condition for subsection (9)(a) to apply, and covers situations where the FCA considers that delay involved in complying with the requirement in subsection (2) would be prejudicial to advancing a) the consumer protection objective or b) if an order under section 137D(1)(b) of FSMA 2000 is in force, the integrity objective.