ENF 10.13 The FSA's policy: rights on petitions by third parties and involvement in creditors meetings

Section 362 of the Act (FSA's powers to participate in proceedings [administration orders]) gives the FSA the right to be heard at the hearing of a petition by a third party for an administration order in respect of an authorised person, appointed representative or an unauthorised company or partnership which is carrying on or has carried on a regulated activity while unauthorised. The FSA has the same right to be heard on a petition by a third party for compulsory winding up (section 371 of the Act (FSA's powers to participate in proceedings [winding up by the court]) and bankruptcy or sequestration (section 374 of the Act (FSA's powers to participate in proceedings [Bankruptcy]). The FSA also has the right to be heard in any hearing in court following the making of such an order.

The FSA will exercise the right to be heard on a third party's petition or in subsequent hearings only where it believes it has information that it considers relevant to the court's consideration of the petition or application. These circumstances may include:

1. (1)

   where the FSA has relevant information which it believes may not otherwise be drawn to the court's attention; especially where the FSA has been asked to attend for a particular purpose (for example to explain the operations of its rules);

2. (2)

   where the FSA believes that the insolvency order being sought by a third party is inappropriate to meet the needs of consumers and the public interest; and

3. (3)

   where the FSA believes that the making of an insolvency order will affect the FSA's exercise of its other powers under the Act, and wishes to make the court aware of this.

The making of an insolvency order operates to stay any proceedings already in place against the company, partnership or individual, and prevents proceedings being commenced while the insolvency order is in place. Proceedings can continue or be commenced against those persons only with the court's permission. This may affect the effectiveness of the FSA's use of its powers to seek injunctions and restitutionary orders from the court. The FSA will draw the court's attention to this potential effect where the FSA believes it is a relevant consideration, but it is a matter for the court to determine its relevance in a particular case.

The FSA is given power to receive the same information as creditors are entitled to receive in the winding up, administration, receivership or voluntary arrangement of an authorised person, of appointed representatives and of persons who have carried out a regulated activity while unauthorised. The FSA is also entitled to attend and make representation at any creditors' meeting or (where relevant) creditors' committee meeting taking place in those regimes. When it decides whether to exercise its power to attend and make representations at meetings the factors which the FSA will take into account include:

1. (1)

   the extent of claims by consumers upon the body or individual;

2. (2)

   the extent to which consumer assets are held by the body or individual on behalf of consumers;

3. (3)

   the extent to which the FSA is aware of concerns of consumers (or other creditors or contributories) about the way in which the insolvency regime is proceeding;

4. (4)

   whether the circumstances which gave rise to the insolvency regime might have general implications for others carrying on regulated business;

5. (5)

   whether the creditors include shareholders, directors, or other persons who have a connection with the management or ownership of the body or are associated with the individual;

6. (6)

   the complexity or specialisation of the business of the body or individual; and

7. (7)

   where there is a significant cross border or international element to the business which the company, partnership or individual is carrying out.