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COMP 6.1 Application and Purpose

Application

COMP 6.1.1 R

This chapter applies to the FSCS.

COMP 6.1.2 G

It is also relevant to claimants.

Purpose

COMP 6.1.3 G

The purpose of this chapter is to specify the types of person against whom a claimant must have a claim in order to be eligible for compensation, and when those persons are 'in default'. Generally, this occurs when they are insolvent or unable to meet their liabilities to claimants.

COMP 6.1.4 G

To be eligible for compensation a claimant's claim must be against a relevant person1(or, where applicable, a successor) 1in default: see COMP 3.2.1 R (2).

COMP 6.2 Who is a relevant person?

COMP 6.2.1 R

A relevant person is a person who was, at the time the act or omission giving rise to the claim against it took place:

  1. (1)

    a participant firm; or

  2. (2)

    an appointed representative of a participant firm.

COMP 6.2.2 G

[deleted]8

3 4
COMP 6.2.2A R

13The FSCS may pay compensation in respect of the activities of a relevant person:

  1. (1)

    (if it was a firm) whether or not it was acting within the scope of its permission;

  2. (2)

    (if it was an appointed representative) whether or not it was acting within the scope of the business for which its principal had accepted responsibility;

  3. (3)

    (if it was a recognised investment exchange) whether or not it was acting in accordance with any recognition requirements resulting from section 286 of the Act and relating to the regulated activity of operating a multilateral trading facility or operating an organised trading facility.

[Note: sections 39(3) and 213(3)(a) of the Act]

COMP 6.2.3 G

A pre-IP completion day incoming EEA firm12 may be a participant firm in respect of acts or omissions before IP completion day11that give rise to a claim against it.

9
COMP 6.2.4 G

A TP firm to which regulation 8 or 11 of the EU Exit Passport Regulations applies, that is not to be regarded as a relevant person under section 213(9A) of the Act (as inserted by regulation 24 of the EU Exit Passport Regulations) is not a participant firm. A TP firm to which regulation 28 or 34 of the EU Exit Passport Regulations applies, that is not to be regarded as a relevant person under section 213(9A) of the Act (as inserted by regulation 70 of the EU Exit Passport Regulations) is not a participant firm. For the purposes of the FCA’s compensation rules, this means that most (but not all) TP firms operating in the UK without an establishment are not participant firms.12

10
COMP 6.2.5 G

14Schedule 6A to the Act sets out a procedure to enable the FCA to cancel or vary the Part 4A permission of a person who, it appears to the FCA, is not carrying on the regulated activity to which the Part 4A permission relates. In some cases, this may result in the person no longer being a relevant person following cancellation of all their Part 4A permissions. Paragraph 5 of Schedule 6A to the Act sets out a procedure for the subsequent annulment of the decision to cancel or vary the person’s Part 4A permission in specified circumstances where the FCA is satisfied that it is just and reasonable to do so. Where the FCA grants an application for annulment, either with conditions or unconditionally, paragraph 6 of Schedule 6A to the Act sets out its effect, which includes that the cancellation or variation of the Part 4A permission is treated as if it had never taken place. As a result of the effect of the annulment, the person may therefore be a relevant person for the purposes of any claims which arise during the period in which the person’s Part 4A permission was cancelled or varied.

COMP 6.3 When is a relevant person in default?

COMP 6.3.1 R

A relevant person is in default if:

  1. (1)

    (except in relation to an ICD claim6) the FSCS has determined it to be in default under COMP 6.3.2 R, COMP 6.3.3 R or6COMP 6.3.4 R6; or

  2. (2)

    (in relation to an ICD claim6):

    1. (a)

      the FCA6 has determined it to be in default under COMP 6.3.2 R; or

    2. (b)

      a judicial authority has made a ruling that had the effect of suspending the ability of eligible claimants to bring claims against the participant firm, if that is earlier than (a); and5

      5

    if a relevant person is in default in relation to an ICD claim6 it shall be deemed to be in default in relation to any other type of protected claim.5

COMP 6.3.1A

[Note: article 2(2)6 of the Investor Compensation Directive6]

COMP 6.3.2 R

The6 FSCS (or, where COMP 6.3.1 R(2)(a) applies, the FCA6) may determine a relevant person to be in default when it is, in the opinion of the FSCS (7or the FCA6)7:

  1. (1)

    unable to satisfy protected claims against it; or

  2. (2)

    likely to be unable to satisfy protected claims against it.

COMP 6.3.3 R

The6 FSCS may determine a relevant person to be in default if it is satisfied that a protected claim exists (other than an ICD claim6), and the relevant person is the subject of one or more of the following proceedings in the United Kingdom (or of equivalent or similar proceedings in another jurisdiction):

  1. (1)

    the passing of a resolution for a creditors' voluntary winding up;

  2. (2)

    a determination by the FCA or the PRA8 that the relevant person appears unable to meet claims against it and has no early prospect of being able to do so;

  3. (3)

    the appointment of a liquidator or administrator, or provisional liquidator or interim manager;

  4. (4)

    the making of an order by a court of competent jurisdiction for the winding up of a company, the dissolution of a partnership, the administration of a company or partnership, or the bankruptcy of an individual;

  5. (5)

    the approval of a company voluntary arrangement, a partnership voluntary arrangement, or of an individual voluntary arrangement;9

  6. (6)

    9a moratorium under Part A1 of the Insolvency Act 1986 being in force.

COMP 6.3.4 R

The6FSCS may6 determine6 a relevant person to be6in default if it is satisfied that a protected claim exists (other than an ICD claim)6, and:

3 3 1
  1. (1)

    the FSCS is satisfied that the relevant person cannot be contacted at its last place of business and that reasonable steps have been taken to establish a forwarding or current address, but without success; and

  2. (2)

    there appears to the FSCS to be no evidence that the relevant person will be able to meet claims made against it.

COMP 6.3.4A G

9For the avoidance of doubt, COMP 6.3.3R and COMP 6.3.4R do not limit COMP 6.3.2R.

COMP 6.3.5 R

[deleted]

COMP 6.3.6 R

[deleted]

COMP 6.3.7 G

[deleted]

Claims arising under COMP 3.2.4 R2

COMP 6.3.8 R

2For the purposes of COMP 6.3 a claim made by a firm under COMP 3.2.4 R is to be treated as if it were a protected claim against the relevant person.

Scheme manager's power to require information

COMP 6.3.9 R

4For the purposes of sections 219(1A)(b) , (d) and (f) 10 of the Act (Scheme manager's power to require information) whether a relevant person is unable or likely to be unable to satisfy claims10 shall be determined by reference to whether it is in default.

COMP 6.3A When is a successor in default?

COMP 6.3A.1 R
  1. (1)

    1A successor is in default if:

    1. (a)

      the FSCS has determined it to be in default under COMP 6.3A.2R, COMP 6.3A.3R, or COMP 6.3A.4R, unless the claim is within (b); or

    2. (b)

      (in relation to an ICD claim against a successor that is a MiFID investment firm):

      1. (i)

        the FCA has determined it to be in default under COMP 6.3A.2R; or

      2. (ii)

        a judicial authority has made a ruling that had the effect of suspending the ability of eligible claimants to bring claims against the successor, if that is earlier than (i).

  2. (2)

    If a successor is in default in relation to an ICD claim within (1)(b) it is to be deemed to be in default in relation to any other type of protected claim.

COMP 6.3A.2 R

The FSCS (or, where COMP 6.3A.1R(1)(b)(i) applies, the FCA) may determine a successor to be in default when it is, in the opinion of the FSCS (3or the FCA)3:

  1. (1)

    unable to satisfy protected claims against it; or

  2. (2)

    likely to be unable to satisfy protected claims against it.

COMP 6.3A.3 R

The FSCS may determine a successor to be in default if it is satisfied that a protected claim exists (other than an ICD claim against a successor that is a MiFID investment firm), and the successor is the subject of one or more of the following proceedings in the United Kingdom (or of equivalent or similar proceedings in another jurisdiction):

  1. (1)

    the passing of a resolution for a creditors' voluntary winding up; or

  2. (2)

    a determination by the FCA or the PRA4 that the successor appears unable to meet claims against it and has no early prospect of being able to do so; or

  3. (3)

    the appointment of a liquidator or administrator, or provisional liquidator or interim manager; or

  4. (4)

    the making of an order by a court of competent jurisdiction for the winding up of a company, the dissolution of a partnership, the administration of a company or partnership, or the bankruptcy of an individual; or

  5. (5)

    the approval of a company voluntary arrangement, a partnership voluntary arrangement, or an individual voluntary arrangement; or5

  6. (6)

    5a moratorium under Part A1 of the Insolvency Act 1986 being in force.

COMP 6.3A.4 R

The2FSCS may2 determine that a successor to be2in default if it is satisfied that a protected claim exists (other than an ICD claim against a successor that is an MiFID investment firm)2, and:

  1. (1)

    the FSCS is satisfied that the successor cannot be contacted at its last place of business and that reasonable steps have been taken to establish a forwarding or current address, but without success; and

  2. (2)

    there appears to the FSCS to be no evidence that the successor will be able to meet claims made against it.

COMP 6.3A.4A G

5For the avoidance of doubt, COMP 6.3A.3R and COMP 6.3A.4R do not limit COMP 6.3A.2R.

COMP 6.3A.5 R

For the purposes of sections 219(1A)(b) , (d) and (f) 6 of the Act (Scheme manager's power to require information) whether a successor is unable or likely to be unable to satisfy claims6 is to be determined by reference to whether it is in default.