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COMP 14.1 Application and Purpose

Application

COMP 14.1.1 R

This chapter applies to the FSCS.

COMP 14.1.2 R

This chapter also applies to an incoming EEA firm which is a credit institution, or an MiFID investment firm4(or both), an IMD insurance intermediary or a UCITS management company.21

4 3

Purpose

COMP 14.1.3 G

This chapter provides supplementary rules and guidance for an incoming EEA firm which is a credit institution, an IMD insurance intermediary, an MiFID investment firm4 or UCITS management company. It reflects in part3 the implementation of the Deposit Guarantee Directive, Investors Compensation Directive, and UCITS Directive. This sourcebook applies in the usual way to an incoming EEA firm which is exercising EEA rights under the Insurance Directives. Such a firm is not affected by the Deposit Guarantee Directive, the Investors Compensation Directive or the UCITS Directive.2

4 1
COMP 14.1.4 G

An incoming EEA firm, which is a credit institution, an IMD insurance intermediary, an MiFID investment firm4 or a UCITS management company is not a participant firm in relation to its passported activities unless it "tops-up" into the compensation scheme (for a UCITS management company, this is only for certain passported activities). This reflects section 213(10) of the Act (The compensation scheme) and regulation 2 of the Electing Participants Regulations (Persons not to be regarded as relevant persons). If an incoming EEA firm also carries on non-passported activities (or, for a UCITS management company, certain passported activities) for which the compensation scheme provides cover, it will be a participant firm in relation to those activities and will be covered by the compensation scheme for those activities in the usual way.21

3 4
COMP 14.1.5 G

In relation to an incoming EEA firm'spassported activities, its Home State compensation scheme must provide compensation cover in respect of business within the scope of the Deposit Guarantee Directive, Investors Compensation Directive and article 5(3)of the UCITS Directive, whether that business is carried on from a UKbranch or on a cross border services basis. (For a UCITS management company, this is only for certain passported activities) Insurance mediation activity relating to non-investment insurance contracts is not within the scope of the Deposit Guarantee Directive and the Investor Compensation Directive.21

COMP 14.1.6 G

If there is no cover provided by the incoming EEA firm'sHome State or the scope or level of cover is less than that provided by the compensation scheme, this chapter enables the firm to obtain cover or 'top-up' cover from the compensation scheme for its passported activities carried on from a UKbranch, up to the compensation scheme's limits (set out in COMP 10). This reflects section 214(5) of the Act (General) and regulation 3 of the Electing Participants Regulations (Persons who may elect to participate). If the firm 'tops up' and then becomes insolvent, the Home State compensation scheme will pay compensation up to the limit and scope of the Home State compensation scheme, with the FSCS paying compensation for the additional amount in accordance with the provisions in this sourcebook (COMP 12.4.1 R and COMP 12.4.4 R).2

COMP 14.2 Obtaining top-up cover

COMP 14.2.1 R

An incoming EEA firm may, by notice in writing to the FSCS, elect to receive top-up cover from the compensation scheme if it falls within one of the categories prescribed in regulation 3 of the Electing Participants Regulations (Persons who may elect to participate).

COMP 14.2.2 R

An election under COMP 14.2.1 R takes effect on the date when the FSCS notifies the incoming EEA firm that its election has been accepted.

COMP 14.2.3 G

A notice under COMP 14.2.1 R should include details confirming that the incoming EEA firm falls within a prescribed category. In summary:

  1. (1)

    the firm must be a credit institution

    an IMD reinsurance intermediary or an MiFID investment firm4 or a UCITS management company;2

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  2. (2)

    the firm must have established a branch in the United Kingdom in the exercise of an EEA right; and

  3. (3)

    the scope and level of cover provided by the firm's Home State compensation scheme must be less than that provided by the compensation scheme.1

COMP 14.2.4 R

When the FSCS accepts an application, it must allocate the incoming EEAfirm to the contribution group (or groups) which seems to the FSCS to be most appropriate, taking into account the nature of the business for which the incoming EEA firm is seeking cover from the compensation scheme.

COMP 14.2.5 R

The FSCS must put in place and publish procedures to enable an appeal by an incoming EEA firm against a rejection by the FSCS of an election to receive top-up cover or a decision to allocate an incoming EEA firm, once the firm's election has been accepted, to a particular contribution group. Such procedures must satisfy the minimum requirements of procedural fairness and comply with the European Convention on Human Rights.

COMP 14.4 Ending top-up cover

FSCS terminating top-up cover

COMP 14.4.1 R

The FSCS must terminate an incoming EEA firm'stop-up cover where it is advised by the firm'sHome State regulator or compensation scheme that the conditions in COMP 14.2.1 R are no longer satisfied.

COMP 14.4.2 R

If an incoming EEA firm which has top-up cover fails to observe any of the rules in this sourcebook which apply to participant firms, the FSCS must notify the FSA and the incoming EEA firm'sHome State regulator.

COMP 14.4.3 R

In cases where COMP 14.4.2 R applies, the FSCS must co-operate with the incoming EEA firm'sHome State regulator so that appropriate measures can be taken to ensure that the incoming EEA firm meets its obligations under this sourcebook.

COMP 14.4.4 R

If the incoming EEA firm fails to meet its obligations for a period of twelve months, the FSCS may terminate its top-up cover.

Resignation of an EEA firm from the compensation scheme

COMP 14.4.5 R

An incoming EEA firm which has top-up cover may terminate that top-up cover by giving six months' notice in writing to the FSCS.

Notice to customers and the FSCS1

COMP 14.4.6 R

When an incoming EEA firm's top-up cover comes to an end under COMP 14.4.1 R, COMP 14.4.4 R or COMP 14.4.5 R, it must:1

1
  1. (1)

    inform all the clients of its UKbranch no later than six weeks after the date that its participation ends that they are no longer protected by the compensation scheme, and of the level of compensation which is then available to them; and1

  2. (2)

    within two months, notify the FSCS whether it has done so.1

COMP 14.4.7 R

If an incoming EEA firm fails to comply with COMP 14.4.6R (1)1, the FSCS must inform the firm's Home State regulator of that fact.

1
COMP 14.4.8 R

The FSCS must bring the ending of an incoming EEA firm's top-up cover to the attention of the incoming EEA firm's clients by means of a public notice.