COMP 1.1 Application, Introduction, and Purpose

This chapter is relevant to:

1. (1)

   the FSCS;

2. (2)

   eligible claimants; and

3. (3)

   firms.

This sourcebook is principally relevant to the FSCS. It sets out the circumstances in which compensation may be paid, to whom compensation may be paid, and on whom the FSCS can impose levies to meet the costs of paying compensation (see in particular COMP 3, 4, and FEES 61). It also describes how the FSCS is to calculate compensation in particular cases (see COMP 12).

Claimants and their advisers will be particularly interested in the sections of this sourcebook which deal with eligibility for claiming compensation, the way that the FSCS calculates compensation, and how they can make a claim. For convenience, the relevant parts of this sourcebook are highlighted in a list of questions and answers in COMP 1.3.3 G.

Firms will be particularly interested in 1FEES 61, which deals with levies and COMP 16 which deals with disclosure requirements for firms that accept deposits.

Under section 212 of the Act (The scheme manager), the FSA must establish a body corporate to exercise the functions that are conferred on that body corporateby Part XV of the Act, dealing with compensation. This body is the Financial Services Compensation Scheme Limited, a company limited by guarantee (FSCS).

The FSA is also required, under section 213 of the Act (The compensation scheme), to make rules establishing a compensation scheme. These rules are set out in the remaining chapters of this sourcebook, and are directed to the FSCS, claimants and potential claimants, and firms.

The FSCS will only pay claims if a firm is unable or likely to be unable to meet claims against it because of its financial circumstances. If a firm is still trading and has sufficient financial resources to satisfy a claim, the firm will be expected to meet the claim itself. This can, for example, be an amount the firm agrees with the claimant, or the amount of an Ombudsman award from the Financial Ombudsman Service.

COMP 1 consists of guidance which is aimed at giving an overview of how this sourcebook works. The provisions of COMP 2 to 162 cover who is eligible, the amount of compensation and how it might be paid, and disclosure requirements for firms that accept deposits.

This sourcebook is one of the means by which the FSA will meet its regulatory objectives of securing the appropriate degree of protection for consumers, contributing to the protection and enhancement of the financial stability of the United Kingdom3 and maintaining confidence in the UK financial system. 3

By setting up the FSCS and making rules that allow the FSCS to provide compensation at a level appropriate for the protection of retail consumers and small businesses, the FSA enables consumers to participate in the financial markets with the confidence that they will be protected, at least in part, should the relevant person with whom they are dealing be unable to satisfy claims against it.