This chapter applies only in relation to e-money issued in the course of the regulated activity of issuing e-money carried on from an establishment maintained by the firm in the United Kingdom, unless ELM 6.10.1 R provides otherwise.

A firm must, if requested to do so, redeem, at par, any e-money it has issued if the request is from a person who lawfully holds the e-money and who is:

1. (1)

   the person to whom the firm issued the e-money; or

2. (2)

   any other person holding the e-money in accordance with the e-money scheme rules other than a merchant who has accepted e-money in the course of business in settlement of goods or services.1

   1

A firm must give a person who is exercising a redemption right against the firm the right to have the proceeds of redemption paid to him in the currency in which the e-money is denominated.

A firm must give a person who is exercising a redemption right against the firm in accordance with ELM 6.5.1 R:

1. (1)

   (in the case of redemption for cash) the right to receive the cash immediately following the completion of the procedures in ELM 6.3.4 R;

2. (2)

   (in the case of redemption in accordance with ELM 6.5.1 R (2)) the right to be paid as follows:

   1. (a)

      the firm must give the necessary payment instructions immediately following the completion of the procedures in ELM 6.3.4 R; and

   2. (b)

      the firm must ensure that the funds reach the holder's account within five business days of the day on which it gave the instructions in (2)(a).

1. (1)

   The procedures referred to in ELM 6.3.3 R are the carrying out of any checks that are reasonably required to prevent money laundering or fraud or to check whether the holder of the e-money is a person who is entitled to redeem it.

2. (2)

   A firm must complete any procedures referred to in (1) as soon as reasonably possible.

Nothing in ELM 6.3 requires a firm to do anything:

1. (1)

   [deleted]2

   2
2. (2)

   prohibited by the Money Laundering Regulations; or

3. (3)

   that would be a criminal offence under the law of any part of the United Kingdom; or

4. (4)

   (in relation to e-money) that would be a criminal offence under the law of a country other than the United Kingdom in which the firm redeems or would redeem that e-money.

A firm does not breach ELM 6.3.3 R (2) if the failure of the funds to reach the holder's account in time is caused by a failure outside the firm's control on the part of any third party that is involved in the funds transfer.

ELM 6.3.1 R does not apply if:

1. (1)

   the e-money to be redeemed has a par value of less than:

   1. (a)

      (if the e-money is denominated in euro) 10 euro; or

   2. (b)

      (if it is denominated in another currency) the equivalent of 10 euro in that currency; and

2. (2)

   this exception is expressly provided for by the e-money scheme rules.

If the e-money scheme rules provide that e-money ceases to be valid after a specified period, the redemption right does not apply after the end of that period.

A firm must not issue e-money that is valid for less than a year. If a firm issues e-money to banks or other distributors who then distribute it to the public, the firm must use reasonable endeavours to ensure that it remains valid for at least a year after its distribution to the public.

A firm must give a person who is exercising a redemption right against the firm the right to have the proceeds of redemption paid to him:

1. (1)

   in cash; or

2. (2)

   by electronic transfer to an account with a bank or other financial undertaking nominated by that person.

A firm must ensure that the exercise of the redemption right will not be unreasonably difficult for anyone entitled to exercise it.

Subject to ELM 6.5.2 R, the firm may choose which of the methods of redemption in ELM 6.5.1 R to offer.

A firm may not charge a person any fee, expenses or other charge for or in connection with the exercise of a redemption right, except that a firm may charge a fee for the redemption of e-money if the following conditions are satisfied:

1. (1)

   the e-money scheme rules give the firm the right to charge that fee;

2. (2)

   the person exercising the redemption right is informed of the amount of the fee after the person makes the request for redemption and before completion of the redemption;

3. (3)

   that person is given the opportunity, after he has received the information as described in (2), of withdrawing the request before the e-money is redeemed;

4. (4)

   the fee is in accordance with the firm's usual tariff of fees for such redemptions; and

5. (5)

   the fee is no greater than necessary to recover the costs to the firm of carrying out that redemption.

Any fee permitted by ELM 6.6.1 R must never exceed the amount of e-money offered for redemption.

A firm must ensure that (for each e-money scheme under which it issues e-money) the e-money scheme rules (so far as the firm is a party to the relevant contracts or can control their contents) are consistent with the rules in this chapter.

A firm must (for any e-money scheme under which the firm issues e-money) ensure that there is a contract between it and:

1. (1)

   any person to whom it issues e-money; and

2. (2)

   any other person with a redemption right against the firm.

The contract referred to in ELM 6.7.2 R (1) must be in force at the time the firm issues the e-money.

The contract referred to in ELM 6.7.2 R (2) must be in force either before the person with the redemption right referred to in ELM 6.7.2 R (2) obtains the e-money in question or as soon as reasonably possible afterwards, having regard to the laws of the jurisdiction in question and the nature of the scheme. It must however be in force no later than the time of redemption.

Any contract referred to in ELM 6.7.2 R must incorporate the duty of the firm under the rules in this chapter to redeem e-money issued by it as a term of that contract. That term must be enforceable against the firm by the person who holds the e-money. That term must include all the rights that the rules in ELM 6.3 to ELM 6.6 say that the firm must give to a person exercising a redemption right against the firm.

A firm must not issue e-money to any person unless that person has been supplied with the information in ELM 6.8.2 R and, where appropriate, ELM 6.8.2A R.1

A firm must make available to actual and prospective holders of e-money issued by the firm or that may be issued by it in the future:

1. (1)

   information about the redemption right, including the information specified in ELM 6.8.4 R; and

2. (2)

   the information specified in ELM 6.8.5 R.

1 2 COBS 5.1 2 (The distance marketing disclosure rules)apply to a firmissuing e-money.

The information in ELM 6.8.2 R must be in a durable medium and in a readily comprehensible form.1

The information referred to in ELM 6.8.2 R (1) is:

1. (1)

   the amount of any fee of the type referred to in ELM 6.6.1 R, or, if there is no such fee, that fact;

2. (2)

   details of how the redemption right is to be exercised;

3. (3)

   the amount of any limit of the type set out in ELM 6.4.1 R, or, if there is no such limit, that fact; and

4. (4)

   the length of any period of validity of the type set out in ELM 6.4.2 R, or, if there is no such period of validity, that fact.

The information referred to in ELM 6.8.2 R (2) is:

1. (1)

   an explanation of the liability of a holder of e-money issued by the firm, and of the liability of the firm, for loss arising from, and the risks to such a holder arising from:

   1. (a)

      the use, by a person other than such a holder, of the e-money electronic device used by the holder;

   2. (b)

      fraud by another in relation to such a holder's e-money;

   3. (c)

      access to or use of such a holder's e-money by another;

   4. (d)

      loss, malfunction, theft or damage to or of any e-money electronic device used by such a holder;

2. (2)

   any other significant risks arising from the acquisition, use or holding of the e-money;

3. (3)

   the fact that the compensation scheme does not cover claims made in connection with issuing e-money;

4. (4)

   details about any scheme that compensates holders of e-money issued by the firm in cases where the firm is unable to satisfy claims against it in relation to e-money or the fact that there is no such scheme;

5. (5)

   details about:

   1. (a)

      the Financial Ombudsman Service and its application to the e-money scheme in question;

   2. (b)

      any other complaints and redress procedures available to the holder; and

   3. (c)

      how the holder may initiate those procedures; and

6. (6)

   a geographical address at which the firm may be contacted.

A firm carrying on an electronic commerce activity from an establishment in the United Kingdom with or for a person in the United Kingdom or another EEA state, in relation to e-money, must also comply with the e-commerce rulesCOBS 5.2.2

1. (1)

   A firm must ensure that:

   1. (a)

      e-money issued by it cannot be stored on a consumer e-money device with a capacity that exceeds the sum in (2); and

   2. (b)

      a consumer e-money holder is not able to hold, as part of the same balance or otherwise under the same arrangements, e-money issued by the firm of an amount that exceeds, at any time, the sum in (2).

2. (2)

   The sum referred to in (1) is:

   1. (a)

      (in a case in which the e-money is denominated in sterling) ?1000;

   2. (b)

      (in a case in which the e-money is denominated in another currency) the equivalent of ?1000 in that currency.

ELM 6.9.1 R does not apply in a particular case if:

1. (1)

   the firm has (in accordance with ELM 6.9.4 R) first given a warning of the matters in ELM 6.9.3 R to the consumer e-money holder referred to in ELM 6.9.1 R (1)(b) and the owner for the time being of the e-money stored on the consumer e-money device referred to in ELM 6.9.1 R (1)(a)(that consumer e-money holder being referred to as the "holder" in ELM 6.9);

2. (2)

   the firm has received an acknowledgement from the holder in accordance with ELM 6.9.5 R; and

3. (3)

   the requirements of ELM 6.9.7 R are met as respects the consumer e-money device referred to in ELM 6.9.1 R (1)(a) or which the holder uses to spend or otherwise use his e-money and as respects the scheme under which the firm issues the e-money.

The warning referred to in ELM 6.9.2 R (1) is a warning that:

1. (1)

   the compensation scheme does not apply to e-money issued by the firm;

2. (2)

   if the firm becomes insolvent the e-money in question may become valueless and unusable; and

3. (3)

   accordingly if the firm becomes insolvent the holder may lose his e-money.

The warning referred to in ELM 6.9.2 R (1) must:

1. (1)

   be in writing;

2. (2)

   be presented in a way that can be easily understood; and

3. (3)

   be presented in such manner as, depending on the means by which the warning is given, is best calculated to bring it to the attention of the holder and to allow him to consider it.

The acknowledgement referred to in ELM 6.9.2 R (2) is an acknowledgement from the holder to the firm that the holder has read and understood the warning given to him under ELM 6.9.2 R (1) and that he accepts those risks.

The acknowledgement referred to in ELM 6.9.2 R (2) must:

1. (1)

   be in writing; and

2. (2)

   relate to the warning referred to in ELM 6.9.2 R (1) only.

The requirements of this rule are only met in a particular case if:

1. (1)

   the scheme under which the e-money is issued is organised in such a way that the loss, malfunction, theft or damage to or of the consumer e-money device referred to in ELM 6.9.2 R (3) will not result in the holder losing any e-money or in any substantial prejudice to his redemption right or his ability to exercise it;

2. (2)

   (in the case of any scheme under which a firm issues e-money) the firm is able to prevent the use or spending of any e-money it issues under that scheme; and

3. (3)

   the identity of the person who is entitled to e-money issued by the firm under the scheme in question, the amount of such e-money to which he is entitled, the identity of the person who at any time has a redemption right against the firm under that scheme and the amount that he is entitled to have redeemed are determined by records maintained by or on behalf of the firm and are not affected by the matters in (1).

The requirements of ELM 6.9.7 R may still be met if the holder is responsible for any unauthorised use of his consumer e-money device that occurs between its loss or theft and the consumer e-money holder notifying the firm of its loss or theft.

A firm must ensure that any consumere-money card on which e-money issued by it can be stored or which can be used to spend or use e-money issued by it has the following information physically printed on it or on the packaging in which it is made available to the public:

1. (1)

   a geographical address at which the firm may be contacted; and

2. (2)

   a brief summary of the risks if the consumer e-money card is lost or stolen.

If (with respect to any obligation of a firm about e-money in ELM 6 and a scheme under which that firm issues that e-money) that scheme falls into ELM 6.10.3 R, that obligation extends to all e-money issued under that scheme, unless ELM 6.10.2 R provides otherwise.

ELM 6.10.1 R does not:

1. (1)

   cover a case in which the design referred to in ELM 6.10.3 R does not materially contribute to the firm's inability to make the distinction referred to in ELM 6.10.3 R; or

2. (2)

   cover e-money in respect of which the firm can establish it is not subject to that obligation; or

3. (3)

   require a firm to extend any rights to a person whose holding the e-money in question is contrary to the e-money schemerules.

An e-money scheme falls into this rule if it is designed in such a way that generally the firm is unable to distinguish between e-money that comes within the scope of the obligation referred to in ELM 6.10.1 R and e-money that would otherwise not.