COMP Compensation Sourcebook

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COMP INTRO

Introduction

COMP INTRO 1

Foreword

(This Foreword to the Compensation sourcebook does not form part of COMP.)


The Act requires the FSA to make rules establishing a scheme for compensating consumers when authorised firms are unable, or likely to be unable, to satisfy claims against them. The body established to operate and administer the compensation scheme is the Financial Services Compensation Scheme Limited (FSCS). By making rules that allow the FSCS to pay compensation to retail consumers and small businesses, focusing protection on those who need it most, the compensation scheme rules form an important part of the toolkit the FSA will use to meet its statutory objectives.

This module of the FSA Handbook contains the rules and guidance that allow the Financial Services Compensation Scheme Limited to pay claims for compensation or secure continuity of insurance when an authorised person is unable or likely to be unable to meet claims against it. The rules specify who is eligible to receive compensation and in what circumstances, how much compensation can be paid to a claimant; and how the scheme will be funded. The compensation rules are of interest to consumers. The rules apply to the FSCS and to authorised firms.



The Sourcebook is divided into 14 Chapters covering all aspects of the scheme:



Chapter 1: Introduction and Overview

This chapter provides an introduction to the FSCS rules and a table of question and answers that may be of interest to consumers.



Chapter 2: The FSCS

This chapter gives the FSCS the duty to administer the compensation scheme. It also sets out the general conditions the FSCS must follow when administering the scheme such as having regard to the efficient and economic use of resources, the requirement to publish an Annual Report, and the duty to ensure consumers are informed about how they can make a claim. The rules in this chapter also require the FSCS to have in place procedures for dealing with complaints.



Chapter 3 The qualifying conditions for paying compensation

This chapter sets out the main qualifying conditions that must be satisfied before the FSCS can pay compensation to claimants or take steps to secure continuity of insurance. These are that a claimant is eligible to claim; the activity that gave rise to the loss is protected by the scheme; the firm against which the claim is being made is protected by the scheme; and that the claimant has assigned his rights to the scheme. Chapters 4-7 expand on the general conditions described in Chapter 3.



Chapter 4 Eligible claimants

This chapter specifies who is eligible to receive compensation or benefit from the continuity of insurance provided by the FSCS.



Chapter 5 What is a protected claim?This chapter specifies the activities that are protected by the FSCS.



Chapter 6 Relevant persons in default

This chapter specifies the circumstances when a firm is in default, that is, when a firm is to be taken as being unable or likely to be unable to meet claims against it. The FSCS can only pay compensation, take steps to secure continuity of insurance, or provide assistance to an insurer in financial difficulties if the circumstances specified in Chapter 6 are met



Chapter 7 Assignment of rights

This chapter enables the FSCS to make an offer of compensation conditional on the claimant assigning to it their rights to claim against the failed firm. If the FSCS recovers from the firm a greater sum than it has paid to the claimant, it must pay the balance to the claimant.



Chapter 8 Rejection of application and withdrawal of offer

This chapter allows the FCSS to reject an application for compensation or withdraw an offer of compensation in specified circumstances.



Chapter 9 Time limits on payment and postponing payment

This chapter requires the FSCS to pay a claim for compensation within a specified time unless specified conditions apply.



Chapter 10 Limits on the amount of compensation payable

This chapter specifies the maximum amount of compensation the FSCS can pay to a claimant, and the limits on the FSCS's duty to secure continuity of insurance for policyholders. Different limits apply depending on whether a claim is for a deposit, a claim on an insurance policy, or a claim in connection with an investment.



Chapter 11 Payment of compensation

This chapter specifies to whom the FSCS may pay compensation. In certain circumstances compensation may be paid to a person other than the claimant.



Chapter 12 Calculating compensation

This chapter specifies how the FSCS will calculate the amount of compensation it can pay to a claimant



Chapter 13 Funding

This chapter allows the FSCS to make levies on authorised firms to fund the operation of the scheme, to pay compensation or secure continuity of insurance. It specifies how FSCS can make levies, how costs are to be allocated, the maximum the FSCS can levy in any particular period of time, and how sums recovered from failed firms are to be treated.



Chapter 14 Participation by EEA firms

This chapter sets out the way the FSCS deals with incoming EEA firms who may choose to top-up into the FSCS to supplement the compensation available from their home state scheme.

COMP 1

Introduction and Overview

COMP 1.1

Application, Introduction, and Purpose

Application

COMP 1.1.1

See Notes

handbook-guidance
This chapter is relevant to:
(1) the FSCS;
(3) firms.

COMP 1.1.2

See Notes

handbook-guidance
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 13). It also describes how the FSCS is to calculate compensation in particular cases (see COMP 12).

COMP 1.1.3

See Notes

handbook-guidance
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.

COMP 1.1.4

See Notes

handbook-guidance
Firms will be particularly interested in COMP 13, which deals with levies.

Introduction

COMP 1.1.5

See Notes

handbook-guidance
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).

COMP 1.1.6

See Notes

handbook-guidance
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.

Purpose

COMP 1.1.7

See Notes

handbook-guidance
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 1.1.8

See Notes

handbook-guidance
COMP 1 consists of guidance which is aimed at giving an overview of how this sourcebook works. The provisions of COMP 2-14 cover who is eligible, the amount of compensation and how it might be paid, and the ways in which the activities of the FSCS are to be financed.

COMP 1.1.9

See Notes

handbook-guidance
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 and maintaining confidence in the financial system.

COMP 1.1.10

See Notes

handbook-guidance
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.

COMP 1.2

The FSCS

COMP 1.2.1

See Notes

handbook-guidance
While this sourcebook deals with the main powers and duties of the FSCS, it does not provide the complete picture. Other aspects of the operation of the FSCS are dealt with through the powers of the Financial Services Compensation Scheme Limited under company law (such as the power to borrow, to take on premises, etc.).

COMP 1.2.2

See Notes

handbook-guidance
(1) In addition, the Act itself confers certain powers upon the FSCS, such as a power under section 219 of the Act (Scheme Manager's powers to require information) to require persons to provide information. These powers are not, therefore, covered by this sourcebook.
(2) Of specific relevance to the way in which the FSCS fulfils its responsibilities is the relationship between the FSCS and the FSA. This is covered in a Memorandum of Understanding which can be found on the FSA website www.fsa.gov.uk.

COMP 1.3

Claimants

COMP 1.3.1

See Notes

handbook-guidance
The FSCS also provides information to claimants and potential claimants about the way the FSCS works and the procedures that need to be followed when making a claim. The FSCS can be contacted at 7th Floor, Lloyds Chambers, 1 Portsoken Street, London E1 8BN, or by telephone or fax (Tel: 020 7892 7300 or Fax: 020 7892 7301), or by e-mail (enquiries@fscs.org.uk).

COMP 1.3.2

See Notes

handbook-guidance
Information about the operation of the FSCS and how to claim is also available from the FSCS website (www.fscs.org.uk).

COMP 1.3.3

See Notes

handbook-guidance

Areas of particular interest to claimants (see COMP 1.1.3G).

This Table belongs to COMP 1.3.3 COMP 1.1.3 G .

COMP 1.4

EEA Firms

COMP 1.4.1

See Notes

handbook-guidance
Incoming EEA firms which are conducting regulated activities in the United Kingdom under a BCD , IMD, ISD or UCITS Directive passport are not required to participate in the compensation scheme in relation to those passported activities. They may apply to obtain the cover of, or 'top-up' into, the compensation scheme if there is no cover provided by the incoming EEA firm'sHome State compensation scheme or if the level or scope of the cover is less than that provided by the compensation scheme. This is covered by COMP 14.

COMP 1.4.2

See Notes

handbook-guidance
If an incoming EEA firm "tops-up", and then becomes insolvent, the Home State compensation scheme will pay compensation for claims 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 1.4.3

See Notes

handbook-guidance
The DGDand ICD require the FSCS to make arrangements with the relevant Home State compensation scheme regarding the payment of compensation (COMP 14.3.1R).

COMP 1.5

Application to Lloyd's

COMP 1.5.1

See Notes

handbook-guidance
The FSA has exercised its power under section 316 of the Act (Direction by Authority) to direct in LLD 8A (Compensation Arrangements for policyholders) that certain core provisions in the Act should apply to members of the Society of Lloyd's (an "insurance market direction"). The effect of the direction is that the FSA may, in relation to members, and in respect of insurance market activities carried on by them, exercise any of the statutory powers conferred by the provisions which are applied by the direction. Those include the powers in Part X to make general rules and give guidance and also the powers in Part XV to make rules for the establishment and operation of a compensation scheme. Accordingly this sourcebook makes provision for the payment of compensation by the FSCS in certain cases arising from insurance business carried on by members, and for raising levies on the Society.

COMP 1.5.2

See Notes

handbook-rule
Notwithstanding anything to the contrary in this sourcebook, in relation to the Society, members and Lloyd's policiesFSCS must act, so far as is reasonably practicable, to ensure that:
(1) Eligible claimants have protection under this sourcebook in relation to Lloyd's policies equivalent to that otherwise afforded to eligible claimants by the FSCS;
(2) FSCS does not meet claims in relation to Lloyd's policies unless the Central Fund is unlikely to be able to meet them;
(3) Claims against members under the compensation scheme which arise from the same loss under the same Lloyd's policy must be treated as a single claim;
(4) any recovery resulting from the exercise of any rights assigned to the FSCS in connection with the payment of compensation to an eligible claimant, is treated by the FSCS in accordance with COMP 7.2.4 R, and any such recovery which is not paid to the claimant in accordance with that rule, is used for the benefit of FSCS in priority to any interest that the Society may have.

COMP 1.5.3

See Notes

handbook-guidance
The effect of COMP 1.5.2 R(4) and COMP 7.2.4A R, and subject to COMP 7.2.4 R(2), is that any recovery obtained by FSCS is retained by FSCS up to an amount equal to the cost to FSCS of paying compensation. To the extent that the Society is entitled to any part of the recovery (for example by agreement with FSCS) it is only paid out of any excess up to a maximum amount equal to that paid out of the Central Fund. Any recovery in excess of the compensation (including payment from the Central Fund) received by the policyholder is paid to the claimant in accordance with COMP 7.2.4 R regardless of whether the Society receives the full amount paid from the Central Fund.

COMP 2

The FSCS

COMP 2.1

Application and Purpose

Application

COMP 2.1.1

See Notes

handbook-rule
This chapter applies to the FSCS.

Purpose

COMP 2.1.2

See Notes

handbook-guidance
In order to carry out its functions and put into effect the provisions set out in COMP 3 - COMP 14 (which deal with determining whether compensation is payable, calculating the amount of compensation that should be paid, and making levies on firms), the FSCS needs to have a variety of powers. The purpose of this chapter is to set out these powers, and the restrictions upon them.

COMP 2.2

Duties of the FSCS

Administering the compensation scheme

COMP 2.2.1

See Notes

handbook-rule
The FSCS must administer the compensation scheme in accordance with the rules in this sourcebook and any other rules prescribed by law to ensure that the compensation scheme is administered in a manner that is procedurally fair and in accordance with the European Convention on Human Rights.

COMP 2.2.2

See Notes

handbook-guidance
The FSCS may:
(1) pay compensation to eligible claimants or secure continuity of insurance for eligible claimants when a relevant person is unable or likely to be unable to meet claims against it in accordance with the sourcebook; and
(2) make levies on participant firms, in accordance with COMP 13 (Funding), to enable it to pay compensation, secure continuity of insurance, or meet the costs of discharging its functions under this sourcebook.

Information for claimants

COMP 2.2.3

See Notes

handbook-rule
The FSCS must publish information for claimants and potential claimants on the operation of the compensation scheme.

Assistance to claimants

COMP 2.2.4

See Notes

handbook-rule
The FSCS may agree to pay the reasonable costs of an eligible claimant bringing or continuing insolvency proceedings against a relevant person (whether those proceedings began before or after a determination of default), if the FSCS is satisfied that those proceedings would help it to discharge its functions under the requirements of this sourcebook.

Annual Report

COMP 2.2.5

See Notes

handbook-guidance
The FSCS must make and publish an annual report to the FSAon the discharge of its functions (section 218 of the Act (Annual report)).

Finance and resources

COMP 2.2.6

See Notes

handbook-rule
The FSCS must have regard to the need to use its resources in the most efficient and economic way in carrying out its functions under the requirements of this sourcebook.

Publication of defaults

COMP 2.2.7

See Notes

handbook-rule
The FSCS must take appropriate steps to ensure that potential claimants are informed of how they can make a claim for compensation as soon as possible after a determination has been made that a relevant person is in default, whether by the FSCS or the FSA.

Complaints

COMP 2.2.8

See Notes

handbook-rule
The FSCS must put in place and publish procedures which satisfy the minimum requirements of procedural fairness and comply with the European Convention on Humans Rights for the handling of any complaints of maladministration relating to any aspect of the operation of the compensation scheme.

COMP 3

The qualifying conditions for compensation

COMP 3.1

Application and Purpose

Application

COMP 3.1.1

See Notes

handbook-rule
This chapter applies to the FSCS.

COMP 3.1.2

See Notes

handbook-guidance
It is also relevant to claimants.

Purpose

COMP 3.1.3

See Notes

handbook-guidance
The purpose of this chapter is to set out in general terms the conditions that must be satisfied before the FSCS can make an offer of compensation, or secure continuity of insurance cover, or provide assistance to an insurance undertaking to enable it to continue insurance business.

COMP 3.1.4

See Notes

handbook-guidance
The qualifying conditions for paying compensation are set out in greater detail in COMP 4 - COMP 7.

COMP 3.2

The qualifying conditions for paying compensation

COMP 3.2.1

See Notes

handbook-rule
The FSCS may pay compensation to an eligible claimant, subject to COMP 11 (Payment of compensation), if it is satisfied that:
(1) an eligible claimant has, for claims other than claims under a protected contract of insurance, made an application for compensation;
(2) the claim is in respect of a protected claim against a relevant person who is in default;
(3) where the FSCS so requires, the claimant has assigned the whole or any part of his rights against the relevant person or against any third party to the FSCS, on such terms as the FSCS thinks fit; and
(4) in the case of a claim under a protected contract of insurance:
(a) it is not reasonably practicable or appropriate to make, or continue to make, arrangements to secure continuity of insurance under COMP 3.3.1 R; or
(b) it would not be appropriate to take, or continue to take, measures under COMP 3.3.3 R to safeguard policyholders of an insurance undertaking in financial difficulties.

COMP 3.2.2

See Notes

handbook-rule
The FSCS may also pay compensation (and any recovery or other amount payable by the FSCS to the claimant) to a person who makes a claim on behalf of another person if the FSCS is satisfied that the person on whose behalf the claim is made:
(1) is or would have been an eligible claimant; and
(2) would have been paid compensation by the FSCS had he been able to make the claim himself, or to pursue his application for compensation further.

COMP 3.2.3

See Notes

handbook-guidance
Examples of the circumstances covered by COMP 3.2.2 R are:
(1) when personal representatives make a claim on behalf of the deceased;
(2) when trustees make a claim on behalf of beneficiaries (for further provisions relating to claims by trustees, see COMP 12.6.1 R to COMP 12.6.7 R);
(3) when the donee of an enduring power of attorney or a lasting power of attorney makes a claim on behalf of the donor of the power;
(4) when the Master of theCourt of Protection makes a claim on behalf of a person incapable by reason of mental disorder of managing and administering his property and affairs;
(5) when an eligible claimant makes a claim for compensation but dies before his claim is determined.

COMP 3.2.4

See Notes

handbook-rule
The FSCS may also pay compensation to a firm, who makes a claim in connection with protected non-investment insurance mediation on behalf of its customers, if the FSCS is satisfied that:
(1) each customer has borne a shortfall in client money held by the firm caused by a secondary pooling event arising out of the failure of a broker or settlement agent which is a relevant person in default;
(2) the customers in respect of which compensation is to be paid satisfy the conditions set out in COMP 3.2.2 R (1);
(3) the customers do not have a claim against the relevant person directly, nor a claim against the firm, in respect of the same loss;
(4) the customers would have been paid compensation by FSCS if the customers had a claim for their share of the shortfall, and if the firm were the relevant person; and
(5) the firm has agreed, on such terms as the FSCS thinks fit, to pay, or credit the accounts of, without deduction, each relevant customer in (1), that part of the compensation equal to the customer's financial loss, subject to the limits in COMP 10.2.

COMP 3.3

Insurance

Securing continuity of long term insurance cover

COMP 3.3.1

See Notes

handbook-rule
The FSCS must make arrangements to secure continuity of insurance for an eligible claimant under a protected contract of insurance which is a long term insurance contract with a relevant person, if:
(1) the relevant person is the subject of any of the proceedings listed in COMP 6.3.3 R(1)-(5);
(2) it is reasonably practicable to do so;
(3) the cost of doing so would, in the opinion of the FSCS at the time it proposes to make the arrangements, be likely to be no more than the cost of paying compensation under COMP 3.2; and
(4) where the relevant person is a member, the FSCS is satisfied that the amounts which the Society is able to provide from the Central Fund are or are likely to be insufficient to ensure that claims against the member under a protected contract of insurance will be met to the level of protection which would otherwise be available under this sourcebook.

COMP 3.3.2

See Notes

handbook-rule
In order to secure continuity of insurance under COMP 3.3.1 R the FSCS may take such measures as it considers appropriate to:
(1) secure or facilitate the transfer of the business of the relevant person in default which consists of carrying out long-term insurance contracts or any part of that business, to another firm; and
(2) secure the issue of policies by another firm to eligible claimants in substitution for their existing policies.

COMP 3.3.2A

See Notes

handbook-rule
The FSCS's duty under COMP 3.3.1 R and COMP 3.3.3 R in respect of a long term insurance contract is limited to ensuring that the claimant will receive at least 90% of any benefit under his contract of insurance, subject to and in accordance with terms corresponding (so far as it appears to the FSCS to be reasonable in the circumstances) to those which have applied under the contract of insurance.

COMP 3.3.2B

See Notes

handbook-rule
If the FSCS secures less than 100% of any benefit of a claimant under a contract, then FSCS must ensure that any future premiums that the claimant is committed to paying under the contract will be reduced by an equivalent amount.

COMP 3.3.2C

See Notes

handbook-rule
(1) In any period when the FSCS is seeking to secure continuity of insurance under COMP 3.3.1 R, it must secure that 90% of any benefit under a long term insurance contract which:
(a) falls due, or would have fallen due, to be paid to any eligible claimant; or
(b) had already fallen due to be paid to any eligible claimant before the beginning of that period and has not yet been paid;
is paid to the eligible claimant in question as soon as reasonably practicable after the time when the benefit in question fell due, or would have fallen due, under contract.
(2) Any payment under (1) is made subject to and in accordance with any other terms which apply or would have applied under the contract.
(3) A payment made under (1) is not subject to the FSCS deciding that the cost of the making the payment would be likely to be no more than the cost of paying compensation under COMP 3.2
(4) Where a payment is due under (1), FSCS may:
(a) make payments to or on behalf of eligible claimants on such terms (including any terms requiring repayment in whole or in part) and on such conditions as it thinks fit (subject to (1)); or
(b) secure that payments (subject to (1)) are made to or on behalf of any such eligible claimants by the liquidator, administrator or provisional liquidator by giving him an indemnity covering any such payments or any class or description of such payments.

COMP 3.3.2D

See Notes

handbook-rule
For the purposes of COMP 3.3.2A R to COMP 3.3.2C R, "benefit" does not include:
(1) any bonus provided for under the contract unless it was declared and vested before the insurance undertaking became the subject of one or more of the proceedings listed in COMP 6.3.3 R (1) to (5); or
(2) any reduction which the FSCS has determined, or any benefit which the FSCS has decided to disregard under COMP 12.4.14 R, to the extent that the FSCS has decided so to treat it.

COMP 3.3.2E

See Notes

handbook-rule
Unless the FSCS has decided to treat the liability of the relevant person under the contract as reduced or (as the case may be) disregarded under COMP 12.4.14 R, it must not treat as a reason for failing to secure, or for delaying the securing of, payments under COMP 3.3.2C R at the level prescribed in that rule the fact that:
(1) it considers that any benefit referred to in COMP 3.3.2C R is or may be excessive in any respect; or
(2) it has referred the contract in question to an independent actuary under COMP 12.4.13 R; or
(3) it considers that it may at some later date decide to treat the liability of the relevant person under a contract as reduced or disregarded under COMP 12.4.14 R;
save where the FSCS decides to exclude certain benefits to the extent that they arise out of the exercise of any option under the policy and for this purpose the option includes, but is not restricted to, a right to surrender the policy.

Insurance undertakings in financial difficulties

COMP 3.3.3

See Notes

handbook-rule
(1) The FSCS may take such measures as it considers appropriate for the purpose of safeguarding the rights of eligible claimants under protected contracts of insurance which are:
(a) general insurance contracts with a relevant person which is an insurance undertaking in financial difficulties (see COMP 3.3.6 R); or
(b) long-term insurance contracts with a relevant person which is an insurance undertaking in financial difficulties (see COMP 3.3.6 R) but in respect of which the FSCS is not securing continuity of insurance within COMP 3.3.1 R;
if at the time it proposes to take the measures, it considers that the cost of doing so is likely to be no more than the cost of paying compensation under COMP 3.2.
(2) Measures under (1) may be taken on such terms (including terms reducing or deferring payment of any liabilities or benefits provided under any protected contract of insurance) as the FSCS considers appropriate.

COMP 3.3.4

See Notes

handbook-rule
The measures contemplated in COMP 3.3.3 R include measures to:
(1) secure or facilitate the transfer of the insurance business of the relevant person, or any part of the business, to another firm;
(2) give assistance to the relevant person to enable it to continue to effect contracts of insurance or carry out contracts of insurance; and
(3) secure the issue of policies by another firm to eligible claimants in substitution for their existing policies.

COMP 3.3.4A

See Notes

handbook-rule
If it thinks appropriate, the FSA may in relation to any insurance undertaking which is in financial difficulties:
(1) give the FSCS assistance in determining what measures under COMP 3.3.3 R are practicable or desirable;
(2) impose constraints on the measures which may be taken by the FSCS under COMP 3.3.3 R;
(3) require the FSCS to provide it with information about any measures which it is proposing to take under COMP 3.3.3 R.

COMP 3.3.5

See Notes

handbook-rule
[deleted]
(1) [deleted]
(2) [deleted]

COMP 3.3.6

See Notes

handbook-rule
For the purpose of COMP 3.3.3 R, a relevant person who is an insurance undertaking is in financial difficulties if:
(1) a liquidator, administrator, provisional liquidator, administrative receiver or interim manager is appointed to the relevant person, or a receiver is appointed by the court to manage the relevant person's affairs; or
(2) there is a finding by a court of competent jurisdiction that the relevant person is unable to pay its debts; or
(3) a resolution is passed for winding up of the relevant person, unless a declaration of solvency has been made in accordance with section 89 of the Insolvency Act 1986; or
(4) the FSA determines that the relevant person who is an insurance undertaking is likely to be unable to satisfy protected claims against it; or
(5) approval is given to any company voluntary arrangement made by the relevant person; or
(6) the relevant person makes a composition or arrangement with any one or more of its creditors providing for the reduction of, or deferral of payment of, the liabilities or benefits provided for under any of the relevant person's policies; or
(7) the relevant person is dissolved or struck off from the Register of Companies; or
(8) a receiver is appointed over particular property of the relevant person; or
(9) any of (1) to (8) or anything equivalent occurs in respect of the relevant person in a jurisdiction outside England and Wales; or
(10) in the case of an insurance undertaking which is a member, the FSCS is satisfied that any of sub-paragraphs (1) to (9) apply to the member, and the amounts which the Society is able to provide from the Central Fund are or are likely to be insufficient to ensure that claims against the member under a protected contract of insurance will be met to the level or protection which would otherwise be available under this sourcebook.

Assessing the costs of paying compensation

COMP 3.3.7

See Notes

handbook-rule
For the purposes of COMP 3.3.1 R (3)and COMP 3.3.3 R (1), when assessing the cost of paying compensation under COMP 3.2FSCS may have regard to the likely total cost of paying compensation arising out of the default, not just the compensation amounts likely to be payable to particular eligible claimants covered by the proposed arrangements for continuity.

COMP 4

Eligible claimants

COMP 4.1

Application and Purpose

Application

COMP 4.1.1

See Notes

handbook-rule
This chapter applies to the FSCS.

COMP 4.1.2

See Notes

handbook-guidance
It is also relevant to those who may wish to bring a claim for compensation.

Purpose

COMP 4.1.3

See Notes

handbook-guidance
The purpose of this chapter is to set out the types of person who are able to claim compensation or benefit from the protection the FSCS is able to provide. A claimant needs to be an eligible claimant to satisfy COMP 3.2.1R(1).

COMP 4.2

Who is eligible to benefit from the protection provided by the FSCS?

COMP 4.2.1

See Notes

handbook-rule
Unless COMP 4.2.3 R applies, an eligible claimant is any person who at any material time:
(1) did not come within COMP 4.2.2 R; or
(2) did come within COMP 4.2.2 R, but satisfied the relevant exception in COMP 4.3.

COMP 4.2.2

See Notes

handbook-rule

Table COMP 4.2.2R Persons not eligible to claim unless COMP 4.3 applies (see COMP 4.2.1R)

This table belongs to COMP 4.2.1R

COMP 4.2.3

See Notes

handbook-rule
A person who is a small business is an eligible claimant in respect of a relevant general insurance contract entered into before commencement only if the person is a partnership.

COMP 4.3

Exceptions: Circumstances where a person coming within COMP 4.2.2R may receive compensation

Deposits

COMP 4.3.1

See Notes

handbook-rule
A person is eligible to claim compensation in respect of a protected depositif, at the date on which the relevant person is determined to be in default:
(1) he came within category (14) of COMP 4.2.2R; or
(2) he came within any of categories (1)-(3) of COMP 4.2.2R, and was not a large company, large mutual association, or a credit institution.

Long term insurance

COMP 4.3.2

See Notes

handbook-rule
A person other than one which comes within any of categories (7)-(12) and (15) of COMP 4.2.2R is eligible to claim compensation in respect of a long term insurance contract.

Relevant general insurance contracts

COMP 4.3.3

See Notes

handbook-rule
(1) A person falling within categories (1)-(4) of COMP 4.2.2 R is eligible to claim compensation in respect of a relevant general insurance contract if, at the date the contract commenced he was a small business.
(2) Where the contract has been renewed, the last renewal date shall be taken as the commencement date.

COMP 4.3.4

See Notes

handbook-rule
A partnership which falls within category 14, or category 17, or both of COMP 4.2.2R is eligible to claim compensation in respect of a relevant general insurance contract entered into before commencement.

COMP 4.3.5

See Notes

handbook-rule
A person who comes within category (16) of COMP 4.2.2R (a 'category 16 person') is eligible to claim compensation if:
(1) the person insured would have been an eligible claimant at the time that his rights against the insurer were transferred to and vested in the category 16 person; or
(2) the liability of the person insured in respect of the category 16 person was a liability under a contract of employer's liability insurance which would have been a liability subject to compulsory insurance had the contract been entered into after 1 January 1972 or (for contracts in Northern Ireland) 29 December 1975; or
(3) the extent of the liability of the person insured in respect of the category 16 person had been agreed in writing by the insurer, or determined by a court or arbitrator, before the date on which the insurer is determined to be in default.

Liability subject to compulsory insurance

COMP 4.3.6

See Notes

handbook-rule
A person who comes within COMP 4.2.2R is eligible to claim compensation in respect of a liability subject to compulsory insurance if the claim is:

Protected investment business and protected mortgage business

COMP 4.3.7

See Notes

handbook-guidance
There are no exceptions to COMP 4.2.2R for claims made in connection with protected investment business or protected mortgage business .

COMP 5

Protected claims

COMP 5.1

Application and Purpose

Application

COMP 5.1.1

See Notes

handbook-rule
This chapter applies to the FSCS.

COMP 5.1.2

See Notes

handbook-guidance
It is also relevant to claimants.

Purpose

COMP 5.1.3

See Notes

handbook-guidance
The purpose of this chapter is to set out the various categories of claim for which compensation may be payable.

COMP 5.2

What is a protected claim?

COMP 5.2.1

See Notes

handbook-rule
A protected claim is:
(1) a claim for a protected deposit(see COMP 5.3); or
(3) a claim in connection with protected investment business (see COMP 5.5); or
(4) a claim in connection with protected mortgage business (see COMP 5.6); or

COMP 5.2.2

See Notes

handbook-guidance
[deleted]

COMP 5.3

Protected deposits

COMP 5.3.1

See Notes

handbook-rule
A deposit is a protected deposit only if:
(1) the deposit was made with:
(a) an establishment of a relevant person in the United Kingdom; or
(b) a branch of a UK firm which is a credit institution established in another EEA State under an EEA right; and
(2) the deposit is not:
(a) a bond issued by a credit institution which is part of the institution's capital, as set out in the Consolidated Banking Directive (Directive 2000/12/EC); or
(b) a secured deposit; or
(c) a deferred share issued by a building society; or
(d) a non-nominative deposit (that is, a deposit made without disclosing the depositor's identity).

COMP 5.4

Protected contracts of insurance

COMP 5.4.1

See Notes

handbook-rule
A protected contract of insurance is:
(1) (if issued after commencement) a contract of insurance within COMP 5.4.2 R (Contracts of insurance issued after commencement)
(2) (if issued before commencement) a contract of insurance within COMP 5.4.5 R (Contracts of insurance issued before commencement)

Contracts of insurance issued after commencement

COMP 5.4.2

See Notes

handbook-rule
A contract of insurance issued after commencement which:
(1) relates to a protected risk or commitment as described in COMP 5.4.3 R;
(2) is issued by the relevant person through an establishment in;
(a) the United Kingdom; or
(b) another EEA State; or
(c) the Channel Islands or the Isle of Man;
(4) is not a reinsurance contract; and
(5) if it is a contract of insurance entered into by a member, was entered into on or after 1 January 2004
is a protected contract of insurance.

COMP 5.4.3

See Notes

handbook-rule
A risk or commitment is a protected risk or commitment for the purpose of COMP 5.4.2 R(1) if:
(1) in the case of a contract of insurance falling within COMP 5.4.2 R(2)(a), it is situated in an EEA State, the Channel Islands or the Isle of Man;
(2) in the case of a contract of insurance falling within COMP 5.4.2 R(2)(b), it is situated in the United Kingdom;
(3) in the case of a contract of insurance falling within COMP 5.4.2 R(2)(c), it is situated in the United Kingdom, the Channel Islands or the Isle of Man.

COMP 5.4.4

See Notes

handbook-rule
For the purpose of COMP 5.4.3 R and COMP 5.4.5 R(1)(b), the situation of a risk or commitment is determined as follows:
(1) for a contract of insurance relating to a building or a building and its contents (in so far as the contents are covered by the same contract of insurance), the risk or commitment is situated where the building is situated;
(2) for a contract of insurance relating to vehicles of any type, the risk or commitment is situated where the vehicle is registered;
(3) for a contract of insurance lasting four months or less covering travel or holiday risks (whatever the class concerned), the risk or commitment is situated where the policyholder took out the contract of insurance; and
(4) in cases not covered by (1) to (3):
(a) where the policyholder is an individual, the risk or commitment is situated where he has his habitual residence at the date when the contract of insurance commenced;
(b) where the policyholder is not an individual, the risk or commitment is situated where the establishment to which the risk or commitment relates is situated at the date when the contract of insurance commenced.

Contracts of insurance issued before commencement

COMP 5.4.5

See Notes

handbook-rule
(1) If after commencement, a relevant person is subject to one or more of the proceedings listed in COMP 6.3.3 R or is declared in default, then a contract of insurance issued by that relevant person before commencement which is within COMP 5.4.5 R(2) is a protected contract of insurance, provided that the relevant person was not a member at the time the contract of insurance was issued, and:
(a) (unless it comes within (b)) at the earlier of the events in (1) it was a "United Kingdom policy" for the purposes of the Policyholders Protection Act 1975;
(b) if the contract of insurance is a contract of employers' liability insurance entered into before 1 January 1972 or (for contracts in Northern Ireland) 29 December 1975, and the claim was agreed after the default of the insurer, the risk or commitment was situated in the United Kingdom (as set out in COMP 5.4.4 R).
(2) The contracts of insurance referred to in COMP 5.4.5 R(1) are:
(b) a contract of insurance within the credit class; and
which in each case is not a reinsurance contract.

Contracts not evidenced by a policy

COMP 5.4.6

See Notes

handbook-rule
If it appears to the FSCS that a person is insured under a contract with an insurance undertaking which is not evidenced by a policy, and it is satisfied that if a policy evidencing the contract had been issued, the person in question would have had a protected contract of insurance, the FSCS must treat the contract as a protected contract of insurance.

Liabilities giving rise to claims under a protected contract of insurance

COMP 5.4.7

See Notes

handbook-rule
The FSCS must treat liabilities of an insurance undertaking which is in default, in respect of the following items, as giving rise to claims under a protected contract of insurance:
(1) (if the contract is not a reinsurance contract and has not commenced) premiums paid to the insurance undertaking; or
(2) proceeds of a long-term insurance contract that is not a reinsurance contract and that has matured or been surrendered which have not yet been passed to the claimant; or
(3) the unexpired portion of any premium in relation to relevant general insurance contracts which are not reinsurance contracts; or
(4) claims by persons entitled to the benefit of a judgement under section 151 of the Road Traffic Act 1988 or Article 98 of the Road Traffic (Northern Ireland) Order 1981.

COMP 5.5

Protected investment business

COMP 5.5.1

See Notes

handbook-rule
Protected investment business is:
(1) designated investment business carried on by the relevant person with the claimant or as agent on his behalf;
(2) the activities of the manager or trustee of an AUT, provided that the claim is made by a holder;
(3) the activities of the ACD or depositary of an ICVC, provided that the claim is made by a holder;
provided that the condition in COMP 5.5.2 R is satisfied.

COMP 5.5.2

See Notes

handbook-rule
COMP 5.5.1 R only applies if the protected investment business was carried on from:
(1) an establishment of the relevant person in the United Kingdom; or
(2) a branch of a UK firm which is:
(a) an ISD investment firm (including a credit institution which is an ISD investment firm), or
and the claim is an ICD claim; or
(3) both (1) and (2).

COMP 5.6

Protected mortgage business

COMP 5.6.1

See Notes

handbook-rule
Protected mortgage business is:
(5) the activities of a mortgage lender which would be arranging but for article 28A of the Regulated Activities Order (Arranging contracts to which the arranger is a party);
provided that the condition in COMP 5.6.2 R is satisfied.

COMP 5.6.2

See Notes

handbook-rule
COMP 5.6.1 R applies only if the protected mortgage business was carried on by a relevant person:
(1) with a customer who was a resident in the United Kingdom; or
(2) from an establishment maintained by the relevant person (or its appointed representative) in the United Kingdom with a customer who was resident elsewhere in the EEA;
at the time the protected mortgage business was carried on.

COMP 5.7

Protected non-investment insurance mediation

COMP 5.7.2

See Notes

handbook-rule
COMP 5.7.1 R only applies if the conditions in (1) and (2) are satisfied:
(1) the protected non-investment insurance mediation was carried on from:
(a) an establishment of the relevant person in the United Kingdom; or
(b) a branch of a UK firm established in another EEA State in the exercise of an EEA right derived from the IMD; and
(2) the customer making the claim (or where COMP 3.2.4 R applies, the customer on behalf of whom a firm makes a claim) was in contact with:
(a) a firm carrying on an insurance mediation activity in the United Kingdom; or
(b) a branch of a UK firm established in another EEA State which is carrying on an insurance mediation activity in the exercise of an EEA right derived from the IMD.

COMP 6

Relevant persons in default

COMP 6.1

Application and Purpose

Application

COMP 6.1.1

See Notes

handbook-rule
This chapter applies to the FSCS.

COMP 6.1.2

See Notes

handbook-guidance
It is also relevant to claimants.

Purpose

COMP 6.1.3

See Notes

handbook-guidance
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

See Notes

handbook-guidance
To be eligible for compensation a claimant's claim must be against a relevant personin default: see COMP 3.2.1 R (2).

COMP 6.2

Who is a relevant person?

COMP 6.2.1

See Notes

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

COMP 6.3

When is a relevant person in default?

COMP 6.3.1

See Notes

handbook-rule
A relevant person is in default if:
(1) (except in relation to an ICD claim or DGD claim) the FSCS has determined it to be in default under COMP 6.3.2 R, COMP 6.3.3 R, COMP 6.3.4 R or COMP 6.3.5 R; or
(2) (in relation to an ICD claim or DGD claim):
(a) the FSA has determined it to be in default under COMP 6.3.2 R; or
(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).

COMP 6.3.2

See Notes

handbook-rule
Subject to COMP 3.3.3 R to COMP 3.3.6 R and COMP 6.3.6 R, the FSCS (or, where COMP 6.3.1 R(2)(a) applies, the FSA) may determine a relevant person to be in default when it is, in the opinion of the FSCS or the FSA:
(1) unable to satisfy protected claims against it; or
(2) likely to be unable to satisfy protected claims against it.

COMP 6.3.3

See Notes

handbook-rule
Subject to COMP 6.3.6 R the FSCS may determine a relevant person to be in default if it is satisfied that a protected claim exists (other than an ICD claim or DGD claim), 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) the passing of a resolution for a creditors' voluntary winding up;
(2) a determination by the relevant person'sHome State regulator that the relevant person appears unable to meet claims against it and has no early prospect of being able to do so;
(3) the appointment of a liquidator or administrator, or provisional liquidator or interim manager;
(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) the approval of a company voluntary arrangement, a partnership voluntary arrangement, or of an individual voluntary arrangement.

COMP 6.3.4

See Notes

handbook-rule
For claims arising in connection with protected investment business or protected mortgage business or protected non-investment insurance mediation, the FSCS has the additional power to determine that a relevant person is in default if it is satisfied that a protected claim exists, and:
(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) there appears to the FSCS to be no evidence that the relevant person will be able to meet claims made against it.

COMP 6.3.5

See Notes

handbook-rule
For claims arising in connection with protected contracts of insurance, the FSCS must treat any term in an insurance undertaking's constitution or in its contracts of insurance, limiting the undertaking's liabilities under a long-term insurance contract to the amount of its assets, as limiting the undertaking's liabilities to any claimant to an amount which is not less than the gross assets of the undertaking.

Members in default and the Central Fund of the Society

COMP 6.3.6

See Notes

handbook-rule
The FSCS may not declare a member to be in default unless it is satisfied that the amounts which the Society may provide from the Central Fund are or are likely to be insufficient to ensure that claims against the member under a protected contract of insurance will be met to the level of protection which would otherwise be available under this sourcebook.

COMP 6.3.7

See Notes

handbook-guidance
If a member is unable fully to meet protected claims against it then in the first instance any shortfall will be avoided by payments by the Society from the assets of the Central Fund. The FSCS will not consider claims for compensation unless it is satisfied that the amounts which the Society will make available from the Central Fund are or are likely to be insufficient to ensure that claims against the member under a protected contract of insurance will be met to the level of protection which would otherwise be available under this sourcebook. The amount which the FSCS may pay in respect of any such claim will be limited to the difference between the amount which the claimant will receive, or is expected to receive, from the member and the Society together and the maximum amount of compensation payable in accordance with COMP 10 and COMP 12.

Claims arising under COMP 3.2.4 R

COMP 6.3.8

See Notes

handbook-rule
For 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.

COMP 7

Assignment of rights

COMP 7.1

Application

Application and Purpose

COMP 7.1.1

See Notes

handbook-rule
This chapter applies to the FSCS.

COMP 7.1.2

See Notes

handbook-guidance
It is also relevant to claimants.

Purpose

COMP 7.1.3

See Notes

handbook-guidance
The FSCS may make an offer of compensation conditional on the assignment of rights to it by a claimant. The purpose of this chapter is to make provision for and set out the consequences of an assignment of the claimant's rights.

COMP 7.2

How does the assignment of rights work?

COMP 7.2.1

See Notes

handbook-rule
The FSCSmay make any payment of compensation to a claimant in respect of a protected claim conditional on the claimant assigning the whole or any part of his rights against the relevant person, or against any third party, or both, to the FSCS on such terms as the FSCS thinks fit.

COMP 7.2.2

See Notes

handbook-rule
If a claimant assigns the whole or any part of his rights against any person to the FSCS as a condition of payment, the effect of this is that any sum payable in relation to the rights so assigned will be payable to the FSCS and not the claimant.

COMP 7.2.3

See Notes

handbook-rule
(1) Before taking assignment of rights from the claimant under COMP 7.2.1 R, the FSCS must inform the claimant that if, after taking assignment of rights, the FSCS decides not to pursue recoveries using those rights it will, if the claimant so requests in writing, reassign the assigned rights to the claimant. The FSCS must comply with such a request in such circumstances.
(2) If the FSCS takes assignment of rights from the claimant under COMP 7.2.1 R, it must pursue all and only such recoveries as it considers are likely to be both reasonably possible and cost effective to pursue.
(3) If the FSCS makes recoveries through rights assigned under COMP 7.2.1 R, it may deduct from any recoveries paid over to the claimant under COMP 7.2.4 R part or all of its reasonable costs of recovery (if any).

COMP 7.2.4

See Notes

handbook-rule
Unless compensation was paid under COMP 9.2.3 R, if a claimant agrees to assign his rights to the FSCS and the FSCS subsequently makes recoveries through those rights, those recoveries must be paid to the claimant:
(1) to the extent that the amount recovered exceeds the amount of compensation (excluding interest paid under ) received by the claimant in relation to the protected claim; or
(2) in circumstances where the amount recovered does not exceed the amount of compensation paid, to the extent that a failure to pay any sums recovered to the claimant would leave a claimant who had promptly accepted an offer of compensation at a disadvantage relative to a claimant who had delayed accepting an offer of compensation (see COMP 7.2.5 R).

COMP 7.2.4A

See Notes

handbook-rule
For the purpose of COMP 7.2.4 R compensation received by eligible claimants in relation to Lloyd's policies may include payments made from the Central Fund.

COMP 7.2.5

See Notes

handbook-rule
The FSCS must endeavour to ensure that a claimant will not suffer disadvantage arising solely from his prompt acceptance of the FSCS's offer of compensation compared with what might have been the position had he delayed his acceptance.

COMP 7.2.6

See Notes

handbook-guidance
As an example of the circumstances which COMP 7.2.5 R is designed to address, take two claimants, A and B.
(1) Both A and B have a protected investment business claim of £60,000 against a relevant personin default. The FSCS offers both claimants £48,000 compensation (the maximum amount payable for such claims COMP 10.2.3 R). A accepts immediately, and assigns his rights against the relevant person to the FSCS, but B delays accepting the FSCS's offer of compensation.
(2) In this example, the liquidator is able to recover assets from the relevant personin default and makes a payment of 50p in the pound to all the relevant person's creditors. If the liquidator made the payment before any offer of compensation from the FSCS had been accepted, A and B would both receive £30,000 each from the liquidator, leaving both with a loss of £30,000 to be met by the FSCS. Both claims would be met in full.
(3) However, if the payment were made by the liquidator after A had accepted the FSCS's offer of compensation and assigned his rights to the FSCS, but before B accepted the FSCS offer of compensation, A would be disadvantaged relative to B even though he has received £48,000 compensation from the FSCS. A would be disadvantaged relative to B because he promptly accepted the FSCS's offer and assigned his rights to the FSCS. Because A has assigned his rights to the FSCS, any payment from the liquidator will be made to the FSCS rather than A. In this case the FSCS has paid A more than £30,000, so the £30,000 from the liquidator that would have been payable to A will be payable in full to the FSCS and not to A.
(4) B is able to exercise his rights against the liquidator because he delayed accepting the FSCS's offer and receives £30,000 from the liquidator. B can then make a claim for the remaining £30,000 to the FSCS which the FSCS can pay in full (see COMP 10.2.2 G). B therefore suffers no loss whereas A is left with a loss of £12,000, being the difference between his claim of £60,000 and the compensation paid by the FSCS of £48,000.

COMP 7.2.7

See Notes

handbook-rule
(1) For the purposes of compensation paid under COMP 3.2.4 R, FSCS may require any firm (including, but not limited to, the claimant firm) to assign to FSCS any rights the firm may have to claim against the relevant person in relation to the amount of the shortfall in client money arising out of the failure of the relevant person.
(2) A firm required by FSCS to assign its rights in (1), must assign those rights as requested, unless it has a reasonable excuse for not doing so.

COMP 8

Rejection of application and withdrawal of offer

COMP 8.1

Application and Purpose

Application

COMP 8.1.1

See Notes

handbook-rule
This chapter applies to the FSCS.

COMP 8.1.2

See Notes

handbook-guidance
It is also relevant to claimants.

Purpose

COMP 8.1.3

See Notes

handbook-guidance
In some circumstances, it may be appropriate for the FSCS to reject an application for compensation, or withdraw an offer of compensation. The purpose of this chapter is to set out when those circumstances arise.

COMP 8.2

Rejection of application for compensation

COMP 8.2.1

See Notes

handbook-rule
If an application for compensation contains any material inaccuracy or omission, the FSCS may reject the application unless this is considered by the FSCS to be wholly unintentional.

COMP 8.2.2

See Notes

handbook-guidance
A rejection under COMP 8.2.1 R does not mean that the claimant cannot receive compensation. A rejected application may be resubmitted, with the appropriate amendments. An application rejected under COMP 8.2.3 R may be resubmitted if COMP 8.2.5 R applies.

COMP 8.2.3

See Notes

handbook-rule
The FSCS must reject an application for compensation if:
(1) the FSCS considers that a civil claim in respect of the liability would have been defeated by a defence of limitation at the earlier of:
(a) the date on which the relevant person is determined to be in default; and
(b) the date on which the claimant first indicates in writing that he may have a claim against the relevant person;
unless COMP 8.2.4 R applies; or
(2) the liability of the relevant person to the claimant has been extinguished by the operation of law, unless COMP 8.2.5 R applies.

COMP 8.2.4

See Notes

handbook-rule
For claims made in connection with protected investment business or protected mortgage business or protected non-investment insurance mediation, the FSCS may disregard a defence of limitation where the FSCS considers that it would be reasonable to do so.

COMP 8.2.5

See Notes

handbook-rule
For claims made in connection with protected investment business or protected non-investment insurance mediation, if a relevant person, incorporated as a company, has been dissolved with the result that its liability to the claimant has been extinguished by operation of law, the FSCS must treat the claim, for the purposes of paying compensation, as if the relevant person had not been dissolved.

COMP 8.2.6

See Notes

handbook-guidance
COMP 8.2.5 R means that the FSCS will be able to pay compensation in cases where:
(1) the company was declared in default on or after 1 December 2001; and
(2) at the time the application for compensation is made, the company has been dissolved.

COMP 8.2.7

See Notes

handbook-rule
The FSCS may reject an application for compensation if:
(1) it relates to an event or transaction which has been reviewed under the provisions of a 'deemed scheme' as defined in the Financial Services and Markets Act 2000 (Transitional Provisions) (Reviews of Pensions Business) Order 2001 (SI 2001/2512); and
(2) as a result of the review in (1) no redress was payable, or redress was paid, in accordance with the regulatory standards for the review of such events or transactions, and the terms of any scheme order, applicable as at the date of the review.

COMP 8.2.8

See Notes

handbook-guidance
The purpose of COMP 8.2.7 R is to allow the FSCS to reject claims relating to pensions review cases where a review was carried out in accordance with the relevant regulatory standards applicable at the time. 'Deemed schemes' are those review schemes set up before commencement (that is, 30 November 2001) but which are treated as schemes for review of past business under the Act, namely the pensions review and FSAVC review.

COMP 8.3

Withdrawal of offer of compensation

COMP 8.3.1

See Notes

handbook-rule
The FSCS may withdraw any offer of compensation made to a claimant if the offer is not accepted or if it is not disputed within 90 days of the date on which the offer is made.

COMP 8.3.2

See Notes

handbook-rule
Where the amount of compensation offered is disputed, the FSCS may withdraw the offer but must consider exercising its powers to make a reduced or interim payment under COMP 11.2.4 R or COMP 11.2.5 R before doing so.

COMP 8.3.3

See Notes

handbook-rule
The FSCS may repeat any offer withdrawn under COMP 8.3.1 R or COMP 8.3.2 R.

COMP 8.3.4

See Notes

handbook-rule
The FSCS must withdraw any offer of compensation if it appears to the FSCS that no such offer should have been made.

COMP 8.3.5

See Notes

handbook-rule
The FSCS must seek to recover any compensation paid to a claimant if it appears to the FSCS that no such payment should have been made, unless the FSCS believes on reasonable grounds that it would be unreasonable to do so, or that the costs of doing so would exceed any amount that could be recovered.

COMP 9

Time limits on payment and postponing payment

COMP 9.1

Application and Purpose

Application

COMP 9.1.1

See Notes

handbook-rule
This chapter applies to the FSCS.

COMP 9.1.2

See Notes

handbook-guidance
It is also relevant to claimants.

Purpose

COMP 9.1.3

See Notes

handbook-guidance
The purpose of this chapter is to ensure that compensation is paid to claimants as quickly as possible and that delays in paying compensation to claimants are kept to a minimum. The FSCS may postpone payment of compensation only in strictly limited circumstances.

COMP 9.2

When must compensation be paid?

COMP 9.2.1

See Notes

handbook-rule
The FSCS must pay a claim as soon as reasonably possible after:
(1) it is satisfied that the conditions in COMP 3.2.1 R have been met; and
(2) it has calculated the amount of compensation due to the claimant;
and in any event within three months of that date, unless the FSA has granted the FSCS an extension, in which case payment must be made no later than six months from that date.

COMP 9.2.2

See Notes

handbook-rule
The FSCS may postpone paying compensation if:
(1) in the case of a claim against a relevant person who is an appointed representative, the FSCS considers that the claimant should make and pursue an application for compensation against the appointed representative's relevant principal; or
(2) in the case of a claim relating to protected investment business which is not an ICD claim or a claim relating to protected mortgage business , the FSCS considers that the claimant should first exhaust his rights against the relevant person or any third party, or make and pursue an application for compensation to any other person; or
(3) in the case of a claim relating to a protected contracts of insurance, the FSCS considers that the liability to which the claim relates or any part of the liability is covered by another contract of insurance with a solvent insurance undertaking, or where it appears that a person, other than the liquidator, may make payments or take such action to secure the continuity of cover as the FSCS would undertake; or
(4) the claim is one which falls within COMP 12.4.5 R or COMP 12.4.7 R and it is not practicable for payment to be made within the usual time limits laid out in COMP 9.2.1 R; or
(5) the claimant has been charged with an offence arising out of or in relation to money laundering, and those proceedings have not yet been concluded; or
(6) the claim relates solely to a bonus provided for under a protected contract of insurance the value of which the FSCS considers to be of such uncertainty that immediate payment of compensation in respect of that bonus would not be prudent and a court has yet to attribute a value to such bonus.

COMP 9.2.3

See Notes

handbook-rule
Notwithstanding COMP 9.2.2 R(2), the FSCS may pay compensation to a claimant in respect of assets held by a relevant person if an insolvency practitioner has been appointed to the relevant person, and:
(1) the FSCS considers it likely that the insolvency practitioner would, in due course, return the assets to the claimant;
(2) the claimant has agreed to be compensated for the assets on the basis of the valuation provided by the FSCS; and
(3) the claimant has agreed, to the satisfaction of the FSCS, that his rights to the assets in respect of which compensation is payable should pass to it.

COMP 10

Limits on the amount of compensation payable

COMP 10.1

Application and Purpose

Application

COMP 10.1.1

See Notes

handbook-rule
This chapter applies to the FSCS.

COMP 10.1.2

See Notes

handbook-guidance
It is also relevant to claimants.

Purpose

COMP 10.1.3

See Notes

handbook-guidance
In most cases it is appropriate for there to be a limit on the amount of compensation payable by the FSCS and that there should be some part of the claim which is not compensatable and for which the claimant must bear the loss. The purpose of this chapter is to set these limits out.

COMP 10.1.4

See Notes

handbook-guidance
The chapter also sets out the limit on the level of protection the FSCS must seek to secure when the FSCS is ensuring that there is continuity of insurance cover.

COMP 10.2

Limits on compensation payable

COMP 10.2.1

See Notes

handbook-rule
The limits on the maximum compensation sums payable by the FSCS for protected claims are set out in COMP 10.2.3 R.

COMP 10.2.2

See Notes

handbook-guidance
The limits apply to the aggregate amount of claims in respect of each category of protected claim that an eligible claimant has against the relevant person. Consequently, a claimant who has, for example, a claim against a relevant person for a deposit of £2,000, and for a further deposit of £1,500, will not receive 100% compensation on both deposits; instead he will receive £3,350 (100% of the first £2,000 and 90% of the next £1,500). Similarly, if a claimant receives more than one payment in respect of a claim or claims on one or more protected contract of insurance, the claimant will only receive 100% of the first £2,000 of the total paid, and not 100% of the first £2,000 of each payment.

COMP 10.2.3

See Notes

handbook-rule

Table Limits

This table belongs to COMP 10.2.1R

COMP 10.2.4

See Notes

handbook-guidance
COMP 12 sets out the rules the FSCS will follow when calculating the amount of compensation payable.

COMP 10.2.5

See Notes

handbook-guidance
COMP 12.4.1 R and COMP 12.4.4 R include further limits relating to Deposit Guarantee Directive claims DGD claims and ICD claims against certain incoming EEA firms. These reflect the Deposit Guarantee Directive DGD and Investor Compensation Directive/s, ICD, under which compensation may be payable by the incoming EEA firm's Home State compensation scheme.

Continuity of insurance cover

Claims against more than one member in respect of a single protected contract of insurance to be treated as a single claim

COMP 10.2.8

See Notes

handbook-rule
In applying the financial limits in COMP 10.2, and in calculating theamount of a claim in respect of a protected contract of insurancearising from the default of one or more members, a policyholder is to be treated as having a single claim for the aggregate of all such amounts as may be payable on the claim in respect of the protected contract of insurance.

Claims arising under COMP 3.2.4 R

COMP 10.2.9

See Notes

handbook-rule
If a firm has a claim under COMP 3.2.4 R, the FSCS must treat the share of the shortfall of each customer as if it were a protected claim for the purposes of calculating the limits of compensation payable, within COMP 10.2, in relation to that customer.

COMP 11

Payment of compensation

COMP 11.1

Application and Purpose

Application

COMP 11.1.1

See Notes

handbook-rule
This chapter applies to the FSCS.

COMP 11.1.2

See Notes

handbook-guidance
It is also relevant to claimants.

Purpose

COMP 11.1.3

See Notes

handbook-guidance
The FSCS will usually pay compensation direct to the claimant, but in certain circumstances it may be appropriate for the FSCS to pay compensation to someone other than the claimant, or to make reduced or interim payments. The purpose of this chapter is to set out when those circumstances arise.

COMP 11.2

Payment

To whom must payment be made?

COMP 11.2.1

See Notes

handbook-rule
If the FSCS determines that compensation is payable, it must pay it to the claimant, or as directed by the claimant, unless:
(1) arrangements have or are being made to secure continuity of insurance under COMP 3.3.1 R to COMP 3.3.2E R or the FSCS is taking measures it considers appropriate to safeguard eligible claimants under COMP 3.3.3 R to COMP 3.3.6 R; or

COMP 11.2.2

See Notes

handbook-rule
Where a claimant has a protected claim arising out of the circumstances described in COMP 12.4.5 R, the FSCS must pay any compensation to:
(1) the trustee of an occupational pension scheme; or
(3) both (1) and (2);
and not to the claimant, unless exceptional circumstances apply.

COMP 11.2.3

See Notes

handbook-rule
Where an eligible claimant has a claim under a protected contract of insurance against a relevant person that is in administration, provisional liquidation, or liquidation, the FSCS may:
(1) make payments to or on behalf of eligible claimants on such terms (including any terms requiring repayment in whole or in part) and on such conditions as it thinks fit (subject to COMP 10); or
(2) secure that payments (subject to COMP 10) are made to or on behalf of any such eligible claimants by the liquidator, administrator or provisional liquidator by giving him an indemnity covering any such payments or any class or description of such payments.

Reduced or interim payments

COMP 11.2.4

See Notes

handbook-rule
If the FSCS is satisfied that in principle compensation is payable in connection with any protected claim, but considers that immediate payment in full would not be prudent because of uncertainty as to the amount of the claimant's overall net claim, it may decide to pay an appropriate lesser sum in final settlement, or to make payment on account.

COMP 11.2.5

See Notes

handbook-rule
The FSCS may also decide to make a payment on account or to pay a lesser sum in final settlement if the claimant has any reasonable prospect for recovery in respect of the claim from any third party or by applying for compensation to any other person.

COMP 11.2.6

See Notes

handbook-rule
The FSCS may not pay a lesser sum in final settlement under COMP 11.2.4 R and COMP 11.2.5 R where the claim is a DGD claim or ICD claim.

COMP 11.2.6A

See Notes

handbook-guidance
COMP 11.2.4 R applies to compensation payable in connection with any protected claim. It would, for example, apply to the situation where the FSCS considers it imprudent to make a payment in full because of uncertainty as to the value a court might attribute to a bonus provided for under a long-term insurance contract. In such circumstances the FSCS may make payment of compensation on account to the policyholder in respect of benefits under the contract the value of which is not uncertain.

Paying interest on compensation

COMP 11.2.7

See Notes

handbook-rule
The FSCS may pay interest on the compensation sum in such circumstances as it considers appropriate.

COMP 11.2.8

See Notes

handbook-rule
Interest under COMP 11.2.7 R is not to be taken into account when applying the limits on the compensation sum payable in respect of a claim under COMP 10.

COMP 12

Calculating compensation

COMP 12.1

Application and Purpose

Application

COMP 12.1.1

See Notes

handbook-rule
This chapter applies to the FSCS.

COMP 12.1.2

See Notes

handbook-guidance
This chapter is also relevant to claimants, since it sets out how a claim will be quantified. (For the process of paying compensation, including the limits on the amount of compensation that can be paid, see COMP 8 - COMP 11).

Purpose

COMP 12.1.3

See Notes

handbook-guidance
The purpose of this chapter is to set out the different ways in which the FSCS is to calculate compensation.

COMP 12.2

Quantification: general

COMP 12.2.1

See Notes

handbook-rule
The amount of compensation payable to the claimant in respect of any type of protected claim is the amount of his overall net claim against the relevant person at the quantification date.

COMP 12.2.2

See Notes

handbook-rule
COMP 12.2.1 R is, however, subject to the other provisions of COMP, in particular those rules that set limits on the amount of compensation payable for various types of protected claim. The limits are set out in COMP 10.

COMP 12.2.3

See Notes

handbook-guidance
Where a liability of a relevant person to an eligible claimant could fall within more than one type of protected claim (see COMP 5.2.1 R), for example a claim in connection with money held by an ISD investment firm that is also a credit institution, the FSCS should seek to ensure that the claimant does not receive any further compensation payment from the FSCS in cases where the claimant has already received compensation from the FSCS in respect of that claim.

Overall net claim

COMP 12.2.4

See Notes

handbook-rule
A claimant's overall net claim is the sum of the protected claims of the same category that he has against a relevant personin default, less the amount of any liability which the relevant person may set off against any of those claims (see COMP 10.2.2 G).

COMP 12.2.5

See Notes

handbook-guidance
For the different categories of protected claim, see COMP 5 and COMP 10.2.3 R.

COMP 12.2.6

See Notes

handbook-guidance
In calculating the claimant's overall net claim, the FSCS may rely, to the extent that it is relevant, on any determination by:
(1) a court of competent jurisdiction;
(2) a trustee in bankruptcy;
(3) a liquidator;
(4) any other recognised insolvency practitioner;
and on the certification of any net sum due which is made in default proceedings of any exchange or clearing house.

COMP 12.2.7

See Notes

handbook-rule
In calculating the claimant's overall net claim, the FSCS must take into account any payments to the claimant (including amounts recovered by the FSCS on behalf of the claimant) made by the relevant person or the FSCS or any other person, if that payment is connected with the relevant person's liability to the claimant.

COMP 12.2.8

See Notes

handbook-rule
The FSCS must calculate the amount of compensation due to the claimant as soon as reasonably possible after it is satisfied that the conditions in COMP 3.2.1 R have been met.

COMP 12.2.9

See Notes

handbook-rule
In calculating the claimant's overall net claim the FSCS must take into account the amounts paid by, or expected to be paid by, the Society from the Central Fund to meet a member's liabilities under the contract which gives rise to the claim.

COMP 12.3

Quantification date

Protected deposits

COMP 12.3.1

See Notes

handbook-rule
For a protected deposit claim, the quantification date is the date the relevant person is determined to be in default, or the date the protected deposit was due and payable, if later.

Protected contracts of insurance

COMP 12.3.2

See Notes

handbook-rule
For a claim under a protected contract of insurance that is a long-term insurance contract, the FSCS must determine as the quantification date a specific date by reference to which the liability of the relevant person to the eligible claimant is to be determined.

COMP 12.3.3

See Notes

handbook-rule
For a claim under a protected contract of insurance that is a relevant general insurance contract, the FSCS must determine as the quantification date a specific date by reference to which the liability of the relevant person to the eligible claimant is to be determined.

COMP 12.3.4

See Notes

handbook-rule
For a claim in respect of the unexpired premiums under a protected contract of insurance that is a relevant general insurance contract (see COMP 5.4.7 R (3)), the quantification date, being the date by which the liability of the relevant person to the eligible claimant is to be determined, is the date the policy was terminated or cancelled.

Protected investment business

COMP 12.3.5

See Notes

handbook-rule
For a claim made in connection with protected investment business which is not an ICD claim, the FSCS must determine a specific date as the quantification date, and this date may be either on, before or after the date of the determination of default.

COMP 12.3.6

See Notes

handbook-rule
For a claim made in connection with protected investment business which is an ICD claim, the quantification date is the date the relevant person is determined to be in default.

Protected mortgage business

COMP 12.3.7

See Notes

handbook-rule
For a claim made in connection with protected mortgage business , the FSCS must determine a specific date as the quantification date, and this date may be either on, before or after the date of determination of default.

Protected non-investment insurance mediation

COMP 12.3.8

See Notes

handbook-rule
For a claim made in connection with protected non-investment insurance mediation, the FSCS must determine a specific date as the quantification date, and this date may be either on, before or after the date of determination of default.

COMP 12.4

The compensation calculation

Protected deposit with incoming EEA firm

COMP 12.4.1

See Notes

handbook-rule
If the claimant has a DGD claim against an incoming EEA firm which is a credit institution, the FSCS must take account of the liability of the Home State deposit-guarantee scheme in calculating the compensation payable by the FSCS.

Protected investment business: general

COMP 12.4.2

See Notes

handbook-rule
The FSCS may pay compensation for any claim made in connection with protected investment business which is not:
(1) a claim for property held; or
(2) a claim arising from transactions which remain uncompleted at the quantification date;
only to the extent that the FSCS considers that the payment of compensation is essential in order to provide the claimant with fair compensation.

COMP 12.4.3

See Notes

handbook-rule
The FSCS must not pay compensation for any claim in connection with protected investment business to the extent that it relates to or depends on:
(1) a failure of investment performance to match a guarantee given or representation made; or
(2) a contractual obligation to pay or promise to pay which the FSCS considers to have been undertaken without full consideration passing to the relevant person or in anticipation of possible insolvency; or
(3) the mere fluctuation in the value of an investment.

COMP 12.4.4

See Notes

handbook-rule
If the claimant has an ICD claim against an incoming EEA firm which is an ISD investment firm (including a credit institution which is an ISD investment firm ), the FSCS must take account of the liability of the Home State compensation scheme in calculating the compensation payable by the FSCS.

Protected investment business: claims covered by the pensions review

COMP 12.4.5

See Notes

handbook-rule
If the claimant has a claim in connection with protected investment business relating to the fact that the claimant has:
(1) while eligible or reasonably likely to become eligible to be a member of an occupational pension scheme, instead become a member of a personal pension scheme or entered into a retirement annuity; or
(2) ceased to be a member of, or to pay contributions to, an occupational pension scheme, and has instead become a member of a personal pension scheme or entered into a retirement annuity; or
(3) transferred to a personal pension scheme accrued rights under an occupational pension scheme which is not a defined contribution (money purchase) scheme; or
(4) ceased to be a member of an occupational pension scheme and has instead (by virtue of such a provision as is mentioned in section 591(2)(g) of the Income and Corporation Taxes Act 1988) entered into arrangements for securing relevant benefits by means of an annuity;
the FSCS must take the steps set out in COMP 12.4.6R.

COMP 12.4.6

See Notes

handbook-rule
If COMP 12.4.5R applies, the FSCS must follow the Specification of Standards and Procedures issued by the FSA in October 1994, as supplemented and modified by subsequent guidance issued by the FSA (in particular, that of November 1996) (the 'Specification') in:
(1) assessing whether a relevant person has complied with the relevant regulatory requirements;
(2) assessing whether non-compliance has caused the claimant loss; and
(3) calculating the amount of compensation due (where the FSCS may rely on calculations made by the FSA or any previous regulator of the relevant person);
unless the FSCS considers that departure from the Specification is essential in order to provide the claimant with fair compensation.

Protected investment business: FSAVC Review

COMP 12.4.7

See Notes

handbook-rule
Where a claim made in connection with protected investment business relates to an Additional Voluntary Contribution policy advised on or arranged by a relevant person, the FSCS must follow the FSAVC Review Model Guidance issued by the FSA in May 2000 (the "Guidance") in:
(1) assessing whether the relevant person has complied with the relevant regulatory requirements;
(2) assessing whether non-compliance has caused the claimant loss; and
(3) calculating the compensation due (where the FSCS may rely on calculations made by the FSA or any previous regulator of the relevant person);
unless the FSCS considers that departure from the Guidance is essential in order to provide the claimant with fair compensation.

Protected investment business: excessive benefits

COMP 12.4.8

See Notes

handbook-rule
The FSCS may decide to reduce the compensation that would otherwise be payable for a claim made in connection with protected investment business that is not an ICD claim, if it is satisfied that:
(1) there is evidence of contributory negligence by the claimant; or
(2) payment of the full amount would provide a greater benefit than the claimant might reasonably have expected or than the benefit available on similar investments with other relevant persons; and
it would be inequitable for the FSCS not to take account of (1) or (2).

Protected contracts of insurance: liabilities subject to compulsory insurance

COMP 12.4.9

See Notes

handbook-rule
The FSCS must pay a sum equal to 100% of any liability of a relevant person who is an insurance undertaking in respect of a liability subject to compulsory insurance to the claimant as soon as reasonably practicable after it has determined the relevant person to be in default.

Protected contracts of insurance: general insurance

COMP 12.4.10

See Notes

handbook-rule
The FSCS must calculate the liability of a relevant person to the claimant under a relevant general insurance contract in accordance with the terms of the contract, and (subject to any limits in COMP 10.2.3R) pay that amount to the claimant.

Protected contracts of insurance: long-term insurance

COMP 12.4.11

See Notes

handbook-rule
Unless the FSCS is making arrangements to secure continuity of insurance cover under COMP 3.3.1R to COMP 3.3.2ER, the FSCS must calculate the liability of a relevant person to the claimant under a long-term insurance contract in accordance with the terms of the contract as valued in a liquidation of the relevant person, or (in the absence of such relevant terms) in accordance with such reasonable valuation techniques as the FSCS considers appropriate.

COMP 12.4.11A

See Notes

handbook-rule
(1) Unless the FSCS is seeking to secure continuity of cover for a relevant person under COMP 3.3.1 R to COMP 3.3.2E R, it must:
(a) pay compensation in accordance with COMP 12.4.11 R for any benefit provided for under a protected long-term insurance contract which has fallen due or would have fallen due under the contract to be paid to any eligible claimant and has not already been paid; and
(b) do as soon as reasonably practicable after the time when the benefit in question fell due or would have fallen due under the contract (but subject to and in accordance with any other terms which apply or would have applied under the contract).
(2) If the FSCS decides to treat the liability of the relevant person under the contract as reduced or (as the case may be) disregarded under COMP 12.4.14 R then, for the purposes of (1), the value of benefits falling due after the date of that decision must be treated as reduced or disregarded to that extent.
(3) Unless it has decided to treat the liability of the relevant person under the contract as reduced or disregarded under COMP 12.4.14 R the FSCS must not treat as a reason for failing to pay, or for delaying the payment of compensation in accordance with (1), the fact that:
(a) it considers that any benefit referred to in (1) is or may be excessive in any respect; or
(b) it has referred the contract in question to an independent actuary under COMP 12.4.13 R; or
(c) it considers that it may at some later date decide to treat the liability of the relevant person under a contract as reduced or (as the case may be) disregarded under COMP 12.4.14 R;
save where the FSCS decides to exclude certain benefits to the extent that they arise out of the exercise of any option under the policy (for this purpose option includes, but is not restricted to, a right to surrender the policy).

COMP 12.4.12

See Notes

handbook-rule
The FSCS must not treat any bonus provided for under a long-term insurance contract as part of the claimant's claim except to the extent that:
(1) a value has been attributed to it by a court in accordance with the Insurers (Winding Up) Rules 2001 or any equivalent rules or legislative provision in force from time to time; or
(2) the FSCS considers that a court would be likely to attribute a value to the bonus if it were to apply the method set out in those rules.

COMP 12.4.13

See Notes

handbook-rule
(1) If the FSCS is:
(a) seeking to secure continuity of cover under COMP 3.3.1 R to COMP 3.3.2E R or to calculate the liability owed to an eligible claimant under COMP 12.4.11 R; and
(b) considers that the benefits provided for under a protected long-term insurance contract are or may be excessive in any respect,
it must refer the contract to an actuary who is independent of the eligible claimant and of the relevant person.
(2) In this rule and in COMP 12.4.14 R, a benefit is only "excessive" if, at the time when the relevant person decided to confer or to offer to confer that benefit, no reasonable and prudent insurer in the position of the relevant person would have so decided given the premiums payable and other contractual terms.

COMP 12.4.14

See Notes

handbook-rule
If the FSCS is satisfied, following the actuary's written recommendation, that any of the benefits provided for under the contract are or may be excessive, it may treat the liability of the relevant person under the contract as reduced or (as the case may be) disregarded for the purpose of any payment made after the date of that decision.

COMP 12.4.15

See Notes

handbook-rule
The FSCS may rely on the value attributed to the contract by the actuary when calculating the compensation payable to the claimant, or when securing continuity of cover.

Protected non-investment insurance mediation

COMP 12.4.16

See Notes

handbook-rule
For claims arising in connection with protected contracts of insurance, the FSCS must treat any term in an insurance undertaking's constitution or in its contracts of insurance, limiting the undertaking's liabilities under a long-term insurance contract to the amount of its assets, as limiting the undertaking's liabilities to any claimant to an amount which is not less than the gross assets of the undertaking.

Protected mortgage business

COMP 12.4.17

See Notes

handbook-rule
The FSCS may pay compensation for any claim made in connection with protected mortgage business only to the extent that the FSCS considers that the payment of compensation is essential in order to provide the claimant with fair compensation.

COMP 12.4.18

See Notes

handbook-rule
The FSCS must not pay compensation for any claim in connection with protected mortgage business to the extent that it relates or depends on:
(1) a failure of investment performance to match a guarantee given or representation made; or
(2) the mere fluctuation in the value of property

COMP 12.4.19

See Notes

handbook-rule
The FSCS may decide to reduce the compensation that would otherwise be payable for a claim made in connection with protected mortgage business if it is satisfied that there is evidence of contributory negligence by the claimant and it would be inequitable for FSCS not to take account of that fact.

Protected non-investment insurance mediation

COMP 12.4.20

See Notes

handbook-rule
The FSCS may pay compensation for any claim made in connection with protected non-investment insurance mediation only to the extent that the FSCS considers that the payment of compensation is essential in order to provide the claimant with fair compensation.

COMP 12.4.21

See Notes

handbook-rule
The FSCS may decide to reduce the compensation that would otherwise be payable for a claim made in connection with protected non-investment insurance mediation if it is satisfied that:
(1) there is evidence of contributory negligence by the claimant; or
(2) payment of the full amount would provide a greater benefit than the claimant might reasonably have expected or than the benefit available on similar contracts with other relevant persons; and
it would be inequitable for FSCS not to take account of (1) or (2).

COMP 12.6

Quantification: trustees, personal representatives, agents, and joint claims

Trustees

COMP 12.6.1

See Notes

handbook-rule
If a claimant's claim includes a claim as trustee, the FSCS must treat him in respect of that claim as if his claim as trustee were a claim of a different person.

COMP 12.6.2

See Notes

handbook-rule
If a claimant has a claim as a bare trustee or nominee company for one or more beneficiaries, the FSCS must treat the beneficiary or beneficiaries as having the claim, and not the claimant.

COMP 12.6.3

See Notes

handbook-rule
If any group of persons has a claim as trustees, the FSCS must treat them as a single and continuing person distinct from the persons who may from time to time be the trustees.

COMP 12.6.4

See Notes

handbook-rule
Where the same person has a claim as trustee for different trusts, COMP applies as if the claims relating to each of these trusts were claims of different persons.

COMP 12.6.5

See Notes

handbook-rule
Where the claimant is a trustee, and some of the beneficiaries of the trust are persons who would not be eligible claimants if they had a claim themselves, the FSCS must adjust the amount of the overall net claim to eliminate the part of the claim which, in the FSCS's view, is a claim for those beneficiaries.

COMP 12.6.6

See Notes

handbook-rule
Where COMP 12.6.1 R to COMP 12.6.5 R apply, the FSCS must try to ensure that any compensation paid to the trustee:
(1) is for the benefit of beneficiaries who would be eligible claimants if they had a claim themselves; and
(2) does not exceed the amount of the loss suffered by those beneficiaries.

COMP 12.6.7

See Notes

handbook-rule
Where a person A is entitled (whether as trustee or otherwise) to a deposit made out of a clients' or other similar account containing money to which one or more persons are entitled, the FSCS must treat each of those other persons, and not A, as entitled to the part of the deposit that corresponds to the proportion of the money in the account to which the other person is entitled.

Personal representative

COMP 12.6.8

See Notes

handbook-rule
Where a person numbers among his claims a claim as the personal representative of another, the FSCS must treat him in respect of that claim as if he were standing in the shoes of that other person.

Agents

COMP 12.6.9

See Notes

handbook-rule
If a claimant has a claim as agent for one or more principals, the FSCS must treat the principal or principals as having the claim, not the claimant.

Joint claims

COMP 12.6.10

See Notes

handbook-rule
If two or more persons have a joint beneficial claim, the claim is to be treated as a claim of the partnership if they are carrying on business together in partnership. Otherwise each of those persons is taken to have a claim for his share, and in the absence of satisfactory evidence as to their respective shares, the FSCS must regard each person as entitled to an equal share.

Foreign law

COMP 12.6.11

See Notes

handbook-rule
In applying COMP to claims arising out of business done with a branch or establishment of the relevant person outside the United Kingdom, the FSCS must interpret references to persons entitled as personal representatives, trustees, bare trustees or agents, or references to persons having a joint beneficial claim or carrying on business in partnership, as references to persons entitled, under the law of the relevant country or territory, in a capacity appearing to the FSCS to correspond as nearly as may be to that capacity.

Claims arising under COMP 3.2.4 R

COMP 12.6.12

See Notes

handbook-rule
If a firm has a claim under COMP 3.2.4 R, the FSCS must treat each customer of the firm as having the claim for the purposes of calculating compensation within COMP 12.

COMP 13

Funding

COMP 13.1

Application and Purpose

Application

COMP 13.1.1

See Notes

handbook-rule
This chapter applies to:
(1) every participant firm;
(2) the FSCS; and
(3) the Society.

COMP 13.1.2

See Notes

handbook-guidance
Firms which are not participant firms (such as certain types of incoming EEA firms, service companies and ICVCs) are not required to contribute towards the funding of the compensation scheme.

COMP 13.1.2A

See Notes

handbook-guidance
Although a member is a participant firm for the purposes of most provisions of COMP, a member is excluded from the definition of participant firm for the purposes of COMP 13 (see definition of participant firm in Glossary). This is because the fees levied in relation to the carrying on of insurance market activities by members will be imposed on Society rather than individually on each member (see COMP 13.4.21 R).

Purpose

COMP 13.1.3

See Notes

handbook-guidance
The purpose of this chapter is to set out the requirements on participant firms to pay levies imposed by the FSCS to provide funding for its functions.

COMP 13.2

General structure

COMP 13.2.1

See Notes

handbook-guidance
Section 213(3)(b) of the Act requires the FSA to make rules to enable the FSCS to impose levies on authorised persons in order to meet its expenses. These expenses include in particular expenses incurred, or expected to be incurred, in paying compensation, borrowing or insuring risks.

COMP 13.2.2

See Notes

handbook-guidance
The FSCS may impose two types of levy: a management expenses levy, and a compensation costs levy. In the first three full years of the operation of the compensation scheme, the FSCS may impose an establishment costs levy as part of a management expenses levy. The FSCS has discretion as to the timing of the levies imposed.

COMP 13.2.3

See Notes

handbook-guidance
In calculating a compensation costs levy, the FSCS may include anticipated compensation costs for defaults expected to be determined in the 12-month period following the date of the levy. The total of all management expenses levies attributable to a financial year will be restricted to the amount set out on an annual basis in COMP 13 Ann 1 R.

COMP 13.2.4

See Notes

handbook-guidance
In order to allocate a share of the amount to be funded by an individual participant firm, the funding arrangements are split into three sub-schemes: the accepting deposits sub-scheme, the insurance business sub-scheme, and the designated investment business sub-scheme. The business carried on by a participant firm determines into which sub-scheme, or sub-schemes, it falls.

COMP 13.2.5

See Notes

handbook-guidance
Within each sub-scheme there are one or more contribution groups. These relate to different types of activity carried on by participant firms within each sub-scheme. Within a sub-scheme, individual participant firms are allocated for funding purposes to one or more contribution groups, depending on their business activities. This meets a requirement of section 213(5) of the Act that the FSA, in making rules to enable the FSCS to impose levies, must take account of the desirability of ensuring that the amount of the levies imposed on a particular class of authorised person reflects, so far as practicable, the amount of claims made, or likely to be made, in respect of that class of person.

The management expenses levy

COMP 13.2.6

See Notes

handbook-guidance
Section 223 of the Act (Management expenses) prevents the FSCS from recovering, through a levy, any management expenses attributable to a particular period in excess of the limit set in COMP as applicable to that period. 'Management expenses' are defined in section 223(3) to mean expenses incurred or expected to be incurred by the FSCS in connection with its functions under the Act, except:
(1) expenses incurred in paying compensation; and
(2) expenses incurred as a result of the FSCS making the arrangements to secure continuity of insurance set out in COMP 3.3.1 R and COMP 3.3.2 R or taking the measures set out in COMP 3.3.3 R and COMP 3.3.4 R when a relevant person is an insurer in financial difficulties.

COMP 13.2.7

See Notes

handbook-guidance
A management expenses levy under COMP may consist of three elements. The first is a base costs levy, for the base costs of running the compensation scheme in a financial year, that is, costs which are not dependent upon the level of activity of the compensation scheme and which therefore are not referable to any specific default. Included in this category are items such as the salary of the members of the board of the FSCS, the costs of the premises which the FSCS occupies, and its audit fees. The amount that each participant firm pays towards a base costs levy is calculated by reference to the regulatory costs paid by the firm. All participant firms are liable to contribute towards a base costs levy.

COMP 13.2.8

See Notes

handbook-guidance
The second element of a management expenses levy is a specific costs levy for the "specific costs" of running the compensation scheme in a financial year. These costs depend on the number of claims and types of default, and include the salaries of the staff of the FSCS and legal and other professional fees paid in respect of particular defaults. The specific costs are allocated to the contribution group or groups of which the relevant personin default was a member, or which is responsible for those costs under COMP, on the basis of the protected claims against that person. The FSCS may include in a specific costs levy the specific costs that the FSCS expects to incur (including in respect of defaults not yet declared at the date of the levy) during the financial year of the compensation scheme to which the levy relates. The amount that each participant firm pays towards the specific costs levy is calculated by reference to the amount of business conducted by the firm in each of the contribution groups to which the FSCS has allocated specific costs. Each contribution group has a separate "tariff base" for this purpose, set out in COMP 13.6.7 R. Participant firms may be exempt from contributing to the specific costs levy.

COMP 13.2.9

See Notes

handbook-guidance
The third element of a management expenses levy is the costs of establishing the FSCS. The FSCS may impose an establishment costs levy only until the end of the third full financial year of operation of the compensation scheme. The amount that each participant firm pays towards the establishment costs levy is calculated on the same basis as the base costs levy, and all participant firms are liable to contribute.

COMP 13.2.10

See Notes

handbook-guidance
The FSA intends to consult in January each year on the amount which it will set as the limit on the management expenses attributable to the forthcoming financial year of the FSCS.

The compensation costs levy

COMP 13.2.11

See Notes

handbook-guidance
The compensation costs levy is made up of the compensation costs which the FSCS has incurred and has not yet recovered from participant firms (less any recoveries it has made using the rights that have been assigned to it), together with those compensation costs it expects to incur (including in respect of defaults yet to be declared) over the 12 months following the date of the levy.

COMP 13.2.12

See Notes

handbook-guidance
Compensation costs are principally the costs incurred in paying compensation. Costs incurred in securing continuity of long-term insurance in safeguarding eligible claimants when insurers are in financial difficulties, and in making payments or giving indemnities under COMP 11.2.3 R are also treated as compensation costs. For funding purposes, these costs are allocated by the FSCS, and met by participant firms, in the same way as specific costs: see COMP 13.6.6 R.

COMP 13.2.13

See Notes

handbook-guidance
If a participant firm is a member of more than one contribution group, the total compensation costs levy and specific costs levy for that firm will be the aggregate of the individual levies calculated for the firm in respect of each of the contribution groups.

Incoming EEA firms

COMP 13.2.14

See Notes

handbook-guidance
Incoming EEA firms which obtain cover or 'top up' under the provisions of COMP 14 are firms whose Home State scheme provides no or limited compensation cover in the event that they are determined to be in default. Under COMP 13.7, the FSCS is required to consider whether incoming EEA firms should receive a discount on the amount that they would otherwise pay as their share of the levy, to take account of the availability of their Home State cover. The amount of any discount is recoverable from the other members of the incoming EEA firm's contribution group.

COMP 13.3

Exemption

COMP 13.3.1

See Notes

handbook-rule
(1) A participant firm which does not conduct business that could give rise to a protected claim by an eligible claimant and has no reasonable likelihood of doing so is exempt from a specific costs levy, or a compensation costs levy, or both, provided that:
(a) it has notified the FSCS in writing that those conditions apply; and
(b) the conditions in fact continue to apply.
(2) The exemption takes effect from the date on which the notice was received by the FSCS, subject to COMP 13.3.6 R.

COMP 13.3.1A

See Notes

handbook-rule
COMP 13.3.1 R does not apply to a participant firm that may be subject to a claim under COMP 3.2.4 R.

COMP 13.3.1B

See Notes

handbook-guidance
A participant firm to which COMP 13.3.1A R applies must report annual eligible income in accordance with COMP 13.6.11 R. Such a participant firm may take advantage of the option to report its annual income attributable to business conducted with or on behalf of eligible claimants.

COMP 13.3.4

See Notes

handbook-rule
A participant firm which is exempt under COMP 13.3.1 R must notify the FSCS in writing as soon as reasonably practicable if the conditions in COMP 13.3.1 R no longer apply.

COMP 13.3.5

See Notes

handbook-guidance
A participant firm to which the conditions in COMP 13.3.1 R no longer apply will then become subject to COMP 13.4, 13.6, and 13.8

COMP 13.3.6

See Notes

handbook-rule
If a participant firm ceases to conduct business that could give rise to a protected claim by an eligible claimant and notifies the FSCS of this under COMP 13.3.1 R (1), it will be treated as a participant firm to which COMP 13.8.7 R applies until the end of the financial year of the compensation scheme in which the notice was given.

COMP 13.3.7

See Notes

handbook-guidance
The financial year of the compensation scheme is the twelve months ending on 31 March.

COMP 13.4

The FSCS's power to impose levies

General limits on levies

COMP 13.4.1

See Notes

handbook-rule
The FSCS may at any time impose a management expenses levy or a compensation costs levy, provided that the FSCS has reasonable grounds for believing that the funds available to it to meet relevant expenses are, or will be, insufficient, taking into account:
(1) in the case of a management expenses levy, the level of the FSCS's anticipated expenditure in respect of those expenses in the financial year of the compensation scheme in relation to which the levy is imposed; and
(2) in the case of a compensation costs levy, the level of the FSCS's anticipated expenditure in respect of compensation costs in the 12 months following the levy.

COMP 13.4.2

See Notes

handbook-guidance
The calculation of levies will also take into account previous levies, where funds raised in anticipation of meeting liabilities prove either more or less than the amount actually required.

COMP 13.4.3

See Notes

handbook-guidance
The FSCS may impose one or more levies in a financial year to meet either its management expenses or its compensation costs. The FSCS may also impose interim levies, as part of its overall levy commitment. This flexibility allows the FSCS to phase its financing over the course of a financial year and thus avoid collecting levies from firms before the money is actually needed. The FSCS has committed itself in the Memorandum of Understanding with the FSA (the text of which can be found on the FSA website www.fsa.gov.uk) to publish regularly an indicative timetable for its levy procedures

COMP 13.4.4

See Notes

handbook-guidance
The discretion over levying in COMP also gives the FSCS, if it thinks this appropriate, the ability to use third parties as its agents in raising and collecting the levies.

Limits on compensation costs levies on sub-schemes

COMP 13.4.5

See Notes

handbook-rule
The FSCS must not require a participant firm in the accepting deposits sub-scheme to pay a share of a compensation costs levy allocated to that sub-scheme to the extent that:
(1) the share in question; plus
(2) all previous amounts paid by the firm either as its share of levies allocated to that sub-scheme, or under the Deposit Protection Scheme (deducting from those amounts any amount refunded under COMP 13.4.17R - COMP 13.4.18R or by the Deposit Protection Scheme);
amounts to more than 0.3% of the firm's protected deposits.

COMP 13.4.6

See Notes

handbook-rule
The FSCS must not require a participant firm in the insurance business sub-scheme to pay a share of a compensation costs levy allocated to that sub-scheme in any financial year of the compensation scheme, to the extent that the share in question, together with all previous amounts paid by the firm as its share of compensation costs levies allocated to that sub-scheme in that financial year, amounts to more than 0.8% of the participant firm's relevant net premium income.

COMP 13.4.7

See Notes

handbook-rule
The maximum amount of compensation costs for which the FSCS can levy the designated investment business sub-scheme in any one financial year of the compensation scheme is limited to £400 million.

COMP 13.4.7A

See Notes

handbook-rule
The FSCS must not require a participant firm in the mortgage advice and arranging sub-scheme to pay a share of a compensation costs levy allocated to that sub-scheme in any financial year of the compensation scheme, to the extent that:
(1) the share in question; plus
(2) all previous amounts paid by the firm as its share of compensation costs levies allocated to that sub-scheme in that financial year;
amounts to more than 0.8% of the participant firm's annual eligible income.

COMP 13.4.7B

See Notes

handbook-rule
The FSCS must not require a participant firm in the general insurance mediation sub-scheme to pay a share of a compensation costs levy allocated to that sub-scheme in any financial year of the compensation scheme, to the extent that:
(1) the share in question; plus
(2) all previous amounts paid by the firm as its share of the compensation costs levy allocated to that sub-scheme in that financial year;
amounts to more than 0.8% of the participant firm's annual eligible income.

Levy for compensation costs paid in error

COMP 13.4.8

See Notes

handbook-rule
The FSCS may include in a compensation costs levy the costs of compensation paid by the FSCS in error, provided that the payment was made in good faith.

Management of funds

COMP 13.4.9

See Notes

handbook-rule
The FSCS must hold any amount collected from a specific costs levy or compensation costs levy to the credit of the sub-schemes and relevant contribution groups, in accordance with the allocation established under COMP 13.5.6 R and COMP 13.6.2 R.

COMP 13.4.10

See Notes

handbook-rule
Any funds received by the FSCS by way of levy or otherwise for the purposes of the compensation scheme are to be managed as the FSCS considers appropriate, and in doing this the FSCS must act prudently.

COMP 13.4.11

See Notes

handbook-rule
Interest earned by the FSCS in the management of funds held to the credit of a contribution group must be credited to that contribution group, and must be set off against the management expenses allocated to that contribution group.

COMP 13.4.12

See Notes

handbook-rule
The FSCS must keep accounts which show:
(1) the funds held to the credit of each sub-scheme and relevant contribution group; and
(2) the liabilities of that sub-scheme and relevant contribution group.

COMP 13.4.13

See Notes

handbook-rule
The FSCS may use the money collected from firms within one sub-scheme to pay compensation costs in respect of any contribution group within that sub-scheme, so long as it ensures that this is done without prejudice to the participant firms from whom the money has been collected.

COMP 13.4.14

See Notes

handbook-guidance
COMP 13.4.13 R means that, for example:
(1) when crediting interest underCOMP 13.4.11 R, the FSCS should regard any money collected from one contribution group which has been used to pay the compensation costs of another contribution group within the same sub-scheme as standing to the credit of the first contribution group; and
(2) the FSCS should not raise a levy under COMP 13.4.1 R on a contribution group solely because, as a result of the FSCS's action under COMP 13.4.13R, there appear to be insufficient funds available to the credit of the contribution group to meet its expenses.

COMP 13.4.15

See Notes

handbook-rule
(1) The FSCS may use any money held to the credit of one sub-scheme (the creditor sub-scheme) to pay compensation costs in respect of another sub-scheme (the debtor sub-scheme) if the FSCS has reasonable grounds to believe that this would be more economical than borrowing funds from a third party or raising a levy.
(2) Where the FSCS acts in accordance with (1), it must ensure that:
(a) the creditor sub-scheme is reimbursed by the debtor sub-scheme as soon as possible;
(b) the debtor sub-scheme pays interest at a rate equivalent to the Bank of England's repo rate from time to time in force; and
(c) the amount lent by the creditor sub-scheme to the debtor sub-scheme is taken into account by the FSCS when considering whether to impose a compensation costs levy on the creditor sub-scheme under COMP 13.4.1R.

COMP 13.4.15A

See Notes

handbook-rule
(1) The FSCS may use any money held to the credit of any sub-scheme to repay borrowing from a third party incurred to pay establishment costs, if in the opinion of the FSCS this would be to the benefit of participant firms.
(2) Where the FSCS acts in accordance with (1), it must ensure that:
(a) future establishment costs levies are used first to repay all amounts borrowed from the appropriate sub-schemes;
(b) interest is paid to the appropriate sub-schemes at a rate equivalent to the Bank of England's repo rate from time to time in force; and
(c) the amount lent by any sub-scheme is taken into account by the FSCS when considering whether to impose a levy under COMP 13.4.1 R.

COMP 13.4.16

See Notes

handbook-rule
UnlessCOMP 13.4.17 R applies, any recoveries made by the FSCS in relation to protected claims must be credited to the contribution groups to which the related compensation costs were allocated.

COMP 13.4.17

See Notes

handbook-rule
If the FSCS makes recoveries in relation to protected claims where the related compensation costs were allocated to the accepting deposits sub-scheme, or in relation to compensation paid out of a special contribution under the Deposit Protection Scheme, and if the FSCS refunds the recoveries underCOMP 13.4.18 R, it must ensure that, as far as possible, the recoveries are refunded to the firms that contributed to the relevant compensation costs levy or special contribution (whether or not the firms are participant firms at the time that the recoveries are made).

COMP 13.4.18

See Notes

handbook-rule
If the FSCS has more funds to the credit of a contribution group than the FSCS believes will be required to meet levies on that contribution group for the next 12 months, it may refund the surplus to members or former members of the contribution group on any reasonable basis.

Adjustments to calculation of levy shares

COMP 13.4.19

See Notes

handbook-rule
The FSCS may adjust the calculation of a participant firm's share of any levy to take proper account of:
(1) any excess, not already taken into account, between previous levies of that type imposed in relation to previous periods and the relevant costs actually incurred in that period; or
(2) participant firms that are exempt from the levy under COMP 13.3; or
(3) amounts that the FSCS has not been able to recover from participant firms as a result of COMP 13.4.5R or COMP 13.4.6R; or
(4) amounts that the FSCS has not been able to recover from participant firms after having taken reasonable steps; or
(5) COMP 13.5.8R (New participant firms), COMP 13.4.20R (Remission of levy) or COMP 13.7 (Incoming EEA firms); or
(6) anything else that the FSCS believes on reasonable grounds should be taken into account.

Remission of levy or additional administrative fee

COMP 13.4.20

See Notes

handbook-rule
If a participant firm's share of a levy or an additional administrative fee under COMP 13.8.4 R would be so small that, in the opinion of the FSCS, the costs of collection would be disproportionate to the amount payable, the FSCS may treat the participant firm as if its share of the levy or additional administrative fee amounted to zero.

Levies on the Society of Lloyd's

COMP 13.4.21

See Notes

handbook-rule
The FSCS may impose a levy on the Society to be calculated as the aggregate of the levies that would be imposed on each member if this chapter applied to members, as follows:
(1) a share of any unexpired portion of an establishment costs levy;
(2) a proportionate share of a base costs levy in respect of the compensation scheme's costs for the period from 1 January 2004 to the end of the compensation scheme's financial year and a share of such levies for all subsequent financial years;
(3) a specific costs levy and a compensation costs levy in respect of costs arising out of a relevant person being in default, arrangements made under COMP 3.3.1 R or measures taken under COMP 3.3.3 R where:
(a) the default occurs or the circumstances giving rise to the arrangements being made or the measures being taken, as the case may be, occur; and
(b) the protected contracts of insurance in connection with which the costs arise were entered into;
on or after 1 January 2004.

COMP 13.5

Management expenses

Obligation on participant firm to pay

COMP 13.5.1

See Notes

handbook-rule
A participant firm must pay to the FSCS a share of each management expenses levy.

Limit on management expenses

COMP 13.5.2

See Notes

handbook-rule
The total of all management expenses levies attributable to a particular period of the compensation scheme may not exceed the limit applicable to that period set out in COMP 13 Ann 1 R.

Participant firm's share

COMP 13.5.3

See Notes

handbook-rule
A participant firm's share of a management expenses levy consists of one or more of:(1) a share of a base costs levy; and(2) a share of a specific costs levy; and(3) a share of an establishment costs levy.

COMP 13.5.4

See Notes

handbook-rule
The FSCS must ensure that each participant firm's share of a management expenses levy separately identifies the firm's share of the base costs levy, specific costs levy and establishment costs levy.

Base costs levy

COMP 13.5.5

See Notes

handbook-rule
Unless COMP 13.4.19 R applies, the FSCS must calculate a participant firm's share of a base costs levy by:
(1) identifying the base costs which the FSCS has incurred, or expects to incur, in the relevant financial year of the compensation scheme, but has not yet levied;
(2) calculating the amount of the participant firm's regulatory costs as a proportion of the total regulatory costs relating to all participant firms for the relevant financial year; and
(3) applying the proportion calculated in (2) to the figure in (1).

Specific costs levy

COMP 13.5.6

See Notes

handbook-rule
(1) The FSCS must (subject to (2)) allocate any specific costs levy amongst the sub-schemes and relevant contribution groups in proportion to the volume of relevant costs arising from, or expected to arise from, claims in respect of the different activities represented by those contribution groups.
(2) The FSCS must allocate any part of a specific costs levy that relates to IFA pensions review claims in accordance with COMP 13.6A.1 R (IFA pensions review compensation levies).

COMP 13.5.7

See Notes

handbook-rule
The FSCS must calculate a participant firm's share of a specific costs levy (subject to COMP 13.4.19 R (Adjustments to calculation of levy shares) and COMP 13.6A.1 R (IFA pensions review compensation levies)) by:
(1) identifying each of the sub-schemes and relevant contribution groups within those sub-schemes to which the participant firm belongs, using the statement of business most recently supplied under COMP 13.6.11 R;
(2) identifying the management expenses other than base costs or establishment costs which the FSCS has incurred, or expects to incur, in the relevant financial year of the compensation scheme, allocated to the contribution groups identified in (1), but not yet levied;
(3) calculating, in relation to each relevant contribution group, the participant firm's tariff base as a proportion of the total tariff base of all participant firms in the contribution group, using the statement of business most recently supplied under COMP 13.6.11 R;
(4) applying the proportion calculated in (3) to the figure in (2); and
(5) if more than one sub-scheme or contribution group is relevant, adding together the figure in (4) for each contribution group.

New participant firms

COMP 13.5.8

See Notes

handbook-rule
A firm which becomes a participant firm part way through a financial year of the compensation scheme will not be liable to pay a share of a specific costs levy made in that year.

COMP 13.5.9

See Notes

handbook-guidance
New participant firms will normally have relevant tariff bases of nil as at 31 December in the financial year preceding that in which they join, so that they will not be required to pay a share of a specific costs levy (or a compensation costs levy because of COMP 13.6.6 R). COMP 13.5.8 R means that the FSCS does not have to estimate the tariff base of a new participant firm.

COMP 13.5.10

See Notes

handbook-guidance
Since a firm that becomes a participant firm in the course of a financial year of the compensation scheme will already be obtaining a discount in relation to the base costs levy and the establishment costs levy through the modified fee provisions of SUP 20.4.4, no rule is necessary in COMP for discounts on the base costs levy or the establishment costs levy.

Establishment costs levy

COMP 13.5.11

See Notes

handbook-rule
The FSCS must calculate a participant firm's share of an establishment costs levy on the same basis as a base costs levy under COMP 13.5.5 R.

COMP 13.5.12

See Notes

handbook-rule
The FSCS may not impose an establishment costs levy after the end of the third full financial year of operation of the compensation scheme.

COMP 13.6

Compensation costs

COMP 13.6.1

See Notes

handbook-rule
The compensation costs levy is made up of compensation costs incurred by the FSCS, together with any compensation costs which can reasonably be anticipated as arising in the 12 months following the levy date, and which in each case have not already been subject to a levy.

COMP 13.6.2

See Notes

handbook-rule
(1) The FSCS must (subject to (2)) allocate any compensation costs levy to the individual sub-schemes and relevant contribution groups in proportion to the volume of compensation costs arising from, or expected to arise from, claims in respect of the different activities represented by those contribution groups.
(2) The FSCS must allocate any part of a compensation costs levy that relates to IFA pensions review claims in accordance with COMP 13.6A.1 R (IFA pensions review compensation levies).

COMP 13.6.3

See Notes

handbook-rule
If a participant firm which is in default has carried on a regulated activity other than in accordance with a permission, the FSCS must allocate any compensation costs or specific costs arising out of that activity to the relevant contribution group which covers that activity.

COMP 13.6.4

See Notes

handbook-rule
If the relevant person in default is an appointed representative, the FSCS must allocate any compensation costs or specific costs arising out of a regulated activity for which his principal has not accepted responsibility to the relevant contribution group for that activity.

COMP 13.6.5

See Notes

handbook-rule
A participant firm must pay to the FSCS a share of each compensation costs levy unless either the firm is exempt under COMP 13.3 (Exemption) or the FSCS has chosen to exercise its discretion under COMP 13.4.20 R in respect of that firm.

COMP 13.6.6

See Notes

handbook-rule
The FSCS must calculate a participant firm's share of a compensation costs levy (subject to COMP 13.6A.1 R (IFA pensions review compensation levies)) on the same basis as a specific costs levy under COMP 13.5.6 R, COMP 13.5.7 R and COMP 13.5.8 R.

COMP 13.6.7

See Notes

handbook-rule
When calculating a participant firm's share of a compensation costs levy or specific costs levy allocated to:
(1) the accepting deposits sub-scheme or the insurance business sub-scheme, the FSCS must use the contribution groups and tariff bases as set out in the table in COMP 13.6.8 R.;
(2) the investment business sub-scheme, the FSCS must (unless (3) applies) use as the contribution groups and tariff bases the correspondingly numbered activity groups and tariff bases set out in part 1 and part 2 of SUP 20 Annex 1 which are identified in COMP 13.6.9 R;
(3) the investment business sub-scheme, where any part of the levy relates to IFA pensions review claims, the FSCS must comply with COMP 13.6A.1 R (IFA pensions review compensation levies);
(4) the mortgage advice and arranging sub-scheme, the FSCS must use the contribution group and tariff base set out in the table in COMP 13.6.9A R;
(5) the general insurance mediation sub-scheme, the FSCS must use the contribution group and tariff base set out in the table in COMP 13.6.9B R.

COMP 13.6.8

See Notes

handbook-rule

Table: Contribution Groups for the Accepting Deposits Sub-scheme and the Insurance Business Sub-scheme for the Financial Services Compensation Scheme (see COMP 13.6.7 R (1))

COMP 13.6.9

See Notes

handbook-rule

Table: The contribution groups and tariff bases for the investment business sub-scheme (see COMP 13.6.7 R (2)). (The contribution groups, legal bases for activity and tariff bases are the same as the correspondingly numbered activity groups and tariff bases set out in part 1 and part 2 of SUP 20 Ann 1).

COMP 13.6.9A

See Notes

handbook-rule

Table: the contribution groups and tariff bases for the mortgage advisers and arrangers (see COMP 13.6.7 R (4))

COMP 13.6.9B

See Notes

handbook-rule

Table: the contribution groups and tariff bases for the general insurance intermediaries (see COMP 13.6.7 R (5))

COMP 13.6.10

See Notes

handbook-guidance
A participant firm may belong to more than one sub-scheme, and more than one contribution group within the same sub-scheme.

COMP 13.6.11

See Notes

handbook-rule
Unless exempt under COMP 13.3.1 R, a participant firm must provide the FSCS by the end of February each year (or, if it has become a participant firm part way through the financial year, by the date requested by the FSA) with a statement of:
(1) the contribution groups to which it belongs; and
(2) the total amount of business (measured in accordance with the appropriate tariff base or bases) which it conducted, as at 31 December of the previous year, in relation to each of those contribution groups.

COMP 13.6.12

See Notes

handbook-rule
If the information in COMP 13.6.11 R has been provided to the FSA under other rule obligations, a participant firm will be deemed to have complied with COMP 13.6.11 R.

COMP 13.6.13

See Notes

handbook-rule
Where a participant firm can identify that a protected deposit was made by a person who is not an eligible claimant, it may exclude the amount of that deposit from the tariff base, provided that it notifies the FSCS of the amount of the deposit so excluded and provides the FSCS with such information about the deposit as the FSCS may reasonably require.

COMP 13.6.14

See Notes

handbook-rule
If a participant firm does not submit a complete statement by the date on which it is due in accordance with COMP 13.6.11 R and any prescribed submission procedures:
(1) the firm must pay an administrative fee of £250 (but not if it is already subject to an administrative fee under SUP 20 Annex 2 Part 1 or DISP 5.5.1 R for the same financial year); and
(2) the compensation costs levy and any specific costs levy will be calculated using (where relevant) the valuation or valuations of business applicable to the previous period, multiplied by the factor of 1.10 (or, if it has become a participant firm part way through a financial year, on the basis of the information provided to the FSA for the purposes of SUP 20.3.2R) or on any other reasonable basis, making such adjustments as seem appropriate in subsequent levies once the true figures are known.

COMP 13.6A

IFA pensions review compensation levies

COMP 13.6A.1

See Notes

handbook-rule
The FSCS must allocate any part of a specific costs levy or compensation costs levy that relates to IFA pensions review claims:
(1) to participant firms which were liable to pay the PIA pensions review compensation costs levy in 2001/2002; and
(2) in the same percentage share as that levy (adjusted to distribute the share of any previous contributor, which is not a participant firm, among remaining participant firms in accordance with their percentage shares).

COMP 13.7

Incoming EEA firms

COMP 13.7.1

See Notes

handbook-rule
If an incoming EEA firm, which is a BCD credit institution, an IMD insurance intermediary or ISD investment firm, is a participant firm, the FSCS must give the firm such discount (if any) as is appropriate on the share of any levy it would otherwise be required to pay, taking account of the nature of the levy and the extent of the compensation coverage provided by the firm's Home State scheme.

COMP 13.8

Payment of levies

COMP 13.8.1

See Notes

handbook-rule
A participant firm must pay its share of any levy made by the FSCS:
(1) in one payment; or
(2) where the FSCS agrees, quarterly, at the beginning of each quarter, by direct debit agreement.

COMP 13.8.2

See Notes

handbook-guidance
The amount paid under a direct debit arrangement will be adjusted on a continuous basis to take account of interim levies and other adjustments made during the course of the financial year.

COMP 13.8.3

See Notes

handbook-rule
A participant firm's share of a levy to which COMP 13.8.1 R (1) applies is due on, and payable within 30 days of, the date when the invoice is issued.

COMP 13.8.4

See Notes

handbook-rule
If a participant firm does not pay its share of a levy as required by COMP 13.8.3 R, it must thereafter pay additional administrative fees of £250 plus interest on any unpaid part of the levy at a rate of 5% over the Bank of England's repo rate, from time to time in force, accruing on a daily basis from the date on which the payment was due.

COMP 13.8.5

See Notes

handbook-rule
If a participant firm does not pay its share of a levy subject to a direct debit agreement as required by COMP 13.8.1 R (2), the entire amount of the levy becomes due and payable to the FSCS, and additional administrative fees are payable at the rate set out in COMP 13.8.4 R.

COMP 13.8.6

See Notes

handbook-rule
If a participant firm fails to make payment under COMP 13, the FSCS may:
(1) take steps to recover any money owed; or
(2) refer the matter to the FSA so that the FSA may take whatever disciplinary action it considers necessary; or
(3) do both (1) and (2).

COMP 13.8.7

See Notes

handbook-rule
If a firm ceases to be a participant firm part way through a financial year of the compensation scheme:
(1) it will remain liable for any unpaid levies which the FSCS has already made on the firm; and
(2) the FSCS may make a levy upon it (which may be before or after the firm has ceased to be a participant firm, but must be before it ceases to be an authorised person) for the costs which it would have been liable to pay had the FSCS made a levy on all participant firms at the time of the levy on the firm.

COMP 13 Ann 1

COMP 13 Ann 1R: Management Expenses Levy Limit

See Notes

handbook-rule
This table belongs to COMP 13.5.2 R

COMP 14

Participation by EEA Firms

COMP 14.1

Application and Purpose

Application

COMP 14.1.1

See Notes

handbook-rule
This chapter applies to the FSCS.

Purpose

COMP 14.1.3

See Notes

handbook-guidance
This chapter provides supplementary rules and guidance for an incoming EEA firm which is a credit institution, an IMD insurance intermediary, an ISD investment firm or UCITS management company . It reflects in part 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.

COMP 14.1.4

See Notes

handbook-guidance
An incoming EEA firm, which is a credit institution, an IMD insurance intermediary, an ISD investment firm 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.

COMP 14.1.5

See Notes

handbook-guidance
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.

COMP 14.1.6

See Notes

handbook-guidance
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).

COMP 14.2

Obtaining top-up cover

COMP 14.2.1

See Notes

handbook-rule
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

See Notes

handbook-rule
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

See Notes

handbook-guidance
A notice under COMP 14.2.1 R should include details confirming that the incoming EEA firm falls within a prescribed category. In summary:
(2) the firm must have established a branch in the United Kingdom in the exercise of an EEA right; and
(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.

COMP 14.2.4

See Notes

handbook-rule
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

See Notes

handbook-rule
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 14.3

Co-operation between the FSCS and Home State compensation schemes

COMP 14.3.1

See Notes

handbook-rule
Where an incoming EEA firm obtains top-up cover under COMP 14.2, the FSCS must seek to establish with that firm's Home State compensation scheme appropriate procedures for the payment of compensation to claimants, following the principles set out in Annex II of the DGD or Annex II of the ICD, as appropriate.

COMP 14.4

Ending top-up cover

FSCS terminating top-up cover

COMP 14.4.1

See Notes

handbook-rule
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

See Notes

handbook-rule
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

See Notes

handbook-rule
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

See Notes

handbook-rule
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

See Notes

handbook-rule
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

COMP 14.4.6

See Notes

handbook-rule
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 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.

COMP 14.4.7

See Notes

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

COMP 14.4.8

See Notes

handbook-rule
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.

Transitional Provisions and Schedules

COMP TP 1

Transitional Provisions

COMP TP 1.1

Transitional Provisions Table

COMP Sch 1

Record-keeping requirements

COMP Sch 1.1

See Notes

handbook-guidance

COMP Sch 1.2

See Notes

handbook-guidance

COMP Sch 2

Notification requirements

COMP Sch 2.1

See Notes

handbook-guidance

COMP Sch 2.2

See Notes

handbook-guidance

COMP Sch 3

Fees and other required payments

COMP Sch 3.1

See Notes

handbook-guidance

COMP Sch 4

Powers Exercised

COMP Sch 4.1

See Notes

handbook-guidance

COMP Sch 4.2

See Notes

handbook-guidance

COMP Sch 4.3

See Notes

handbook-guidance

COMP Sch 5

Rights of action for damages

COMP Sch 5.1

See Notes

handbook-guidance

COMP Sch 5.2

See Notes

handbook-guidance

COMP Sch 6

Rules that can be waived

COMP Sch 6.1

See Notes

handbook-guidance