COMP Compensation Sourcebook

Part

COMP Compensation Sourcebook

Printed on: 22/12/2024

Rulebook at: 14/01/2005

Chapters

COMP INTRO Introduction
COMP 1 Introduction and Overview
COMP 2 The FSCS
COMP 3 The qualifying conditions for compensation
COMP 4 Eligible claimants
COMP 5 Protected claims
COMP 6 Relevant persons in default
COMP 7 Assignment of rights
COMP 8 Rejection of application and withdrawal of offer
COMP 9 Time limits on payment and postponing payment
COMP 10 Limits on the amount of compensation payable
COMP 11 Payment of compensation
COMP 12 Calculating compensation
COMP 13 Funding
COMP 14 Participation by EEA Firms
Transitional Provisions and Schedules

COMP INTRO

Introduction

COMP INTRO 1

Foreword

01/12/2004

(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.

01/12/2004

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

01/12/2004

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.

01/12/2004

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.

01/12/2004

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.

01/12/2004

Chapter 4 Eligible claimants
This chapter specifies who is eligible to receive compensation or benefit from the continuity of insurance provided by the FSCS.

01/12/2004

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

01/12/2004

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

01/12/2004

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.

01/12/2004

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.

01/12/2004

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.

01/12/2004

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.

01/12/2004

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.

01/12/2004

Chapter 12 Calculating compensation
This chapter specifies how the FSCS will calculate the amount of compensation it can pay to a claimant

01/12/2004

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.

01/12/2004

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.

01/12/2004

COMP 1

Introduction and Overview

COMP 1.1

Application, Introduction, and Purpose

01/12/2004

Application

COMP 1.1.1

This chapter is relevant to:

(1) the FSCS;

(2) eligible claimants; and

(3) firms.

01/12/2001

COMP 1.1.2

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).

01/12/2001

COMP 1.1.3

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.

01/12/2001

COMP 1.1.4

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

01/12/2001

Introduction

COMP 1.1.5

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).

01/12/2001

COMP 1.1.6

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.

01/12/2001

Purpose

COMP 1.1.7

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.

01/12/2001

COMP 1.1.8

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.

01/12/2001

COMP 1.1.9

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.

01/12/2001

COMP 1.1.10

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.

01/12/2001

COMP 1.2

The FSCS

01/12/2004

COMP 1.2.1

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.).

01/12/2001

COMP 1.2.2

(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.

01/12/2001

COMP 1.3

Claimants

01/12/2004

COMP 1.3.1

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).

01/12/2001

COMP 1.3.2

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

01/12/2001

COMP 1.3.3

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

This Table belongs to COMP 1.3.3 COMP 1.1.3 G .

What do I need to do in order to receive compensation?

In order to receive compensation:

(1)

you must be an eligible claimant;

COMP 4.2

(2)

you must have a protected claim;

COMP 5.2

(3)

you must be claiming against a relevant person;

COMP 6.2.1 R

(4)

the relevant person must be in default.

COMP 6.3

In addition, if the FSCS requires you to do so, you must assign your legal rights in the claim to the FSCS.

COMP 7.2

And you must bring your claim to the FSCS within a set time (normally within six years of the date on which your claim against the relevant person occurred).

COMP 8.2.3 R - COMP 8.2.5 R

It is possible, in certain circumstances, for someone else to make a claim on your behalf.

COMP 3.2.2 R

How much compensation will I be offered?

This depends on whether your protected claim is:

(1)

a claim for a protected deposit; or

COMP 5.3

(2)

a claim under a protected contract of insurance; or

COMP 5.4

(3)

a claim in connection with protected investment business; or

COMP 5.5

(4)

a claim in connection with protected mortgage business; or

COMP 5.6

(5)

a claim in connection with protected non-investment insurance mediation.

COMP 5.7

Different limits apply to different types of claim.

COMP 10.2.3 R

How will the FSCS calculate the compensation that is offered to me?

Again, this will depend on whether your protected claim is a:

(1)

a claim for a protected deposit;

COMP 12.2.1 R, COMP 12.3.1 R and COMP 12.4.1 R

(2)

a claim under a protected contract of insurance;

COMP 12.2.1 R, COMP 12.3.2 R and COMP 12.4.9 R

(3)

a claim in connection with protected investment business; or

COMP 12.2.1 R, COMP 12.3.5 R and COMP 12.4.2 R

(4)

a claim in connection with protected mortgage business.

COMP 12.4.17 R

(5)

a claim in connection with protected non-investment insurance mediation.

COMP 12.4.20 R

Certain types of protected investment business claim require the FSCS to use a particular method of calculation.

COMP 12.4.5 R

What happens if an insurance undertaking is insolvent?

If you have a long-term insurance contract which is not a reinsurance contract with an insolvent insurance undertaking, the FSCS will first try to secure continuity of insurance for you.

COMP 3.3, COMP 11.2.3 R and COMP 12.4.11 R

If the FSCS achieves this, you will not necessarily receive any cash, but you will continue to be insured (though possibly with lower benefits than before).

COMP 3.3 and COMP 11.2.3 R.

You will receive cash compensation only if the FSCS cannot secure continuity of insurance cover or the cost of doing so would be unreasonable.

COMP 3.3.1 R and COMP 11.2.1 R

If you have a relevant general insurance contract which is not a reinsurance contract with an insolvent insurance undertaking, the FSCS will pay you cash compensation if it is unable to secure continuity of insurance cover or the cost of doing so would be unreasonable.

COMP 3.2.1 R and COMP 11.2.3 R

If the insurance undertaking is in "financial difficulties", the FSCS may try to arrange for another insurance undertaking to take over the business, or provide the insurance undertaking with financial assistance to carry on business. If this occurs, you will not receive cash compensation, but your policy will continue (though possibly with lower benefits than before).

COMP 3.3.3 R and COMP 11.2.3 R

31/10/2004

COMP 1.4

EEA Firms

01/12/2004

COMP 1.4.1

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's Home 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.

13/02/2004

COMP 1.4.2

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.

01/12/2001

COMP 1.4.3

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).

01/12/2001

COMP 1.5

Application to Lloyd's

01/12/2004

COMP 1.5.1

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.

01/01/2004

COMP 1.5.2

Notwithstanding anything to the contrary in this sourcebook, in relation to the Society, members and Lloyd's policies FSCS 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.

01/01/2004

COMP 1.5.3

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.

01/01/2004

COMP 2

The FSCS

COMP 2.1

Application and Purpose

01/12/2004

Application

COMP 2.1.1

This chapter applies to the FSCS.

01/12/2001

Purpose

COMP 2.1.2

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.

01/12/2001

COMP 2.2

Duties of the FSCS

01/12/2004

Administering the compensation scheme

COMP 2.2.1

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.

01/12/2001

COMP 2.2.2

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.

01/12/2001

Information for claimants

COMP 2.2.3

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

01/12/2001

Assistance to claimants

COMP 2.2.4

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.

01/12/2001

Annual Report

COMP 2.2.5

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

01/12/2001

Finance and resources

COMP 2.2.6

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.

01/12/2001

Publication of defaults

COMP 2.2.7

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.

01/12/2001

Complaints

COMP 2.2.8

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.

01/12/2001

COMP 3

The qualifying conditions for compensation

COMP 3.1

Application and Purpose

01/12/2004

Application

COMP 3.1.1

This chapter applies to the FSCS.

01/12/2001

COMP 3.1.2

It is also relevant to claimants.

01/12/2001

Purpose

COMP 3.1.3

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.

01/12/2001

COMP 3.1.4

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

01/12/2001

COMP 3.2

The qualifying conditions for paying compensation

01/12/2004

COMP 3.2.1

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.

01/12/2003

COMP 3.2.2

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.

01/12/2001

COMP 3.2.3

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.

01/12/2001

COMP 3.2.4

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.

14/01/2005

COMP 3.3

Insurance

01/12/2004

Securing continuity of long term insurance cover

COMP 3.3.1

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.

01/01/2004

COMP 3.3.2

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.

01/12/2003

COMP 3.3.2A

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.

01/12/2003

COMP 3.3.2B

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.

01/12/2003

COMP 3.3.2C

(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.

01/10/2004

COMP 3.3.2D

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.

01/12/2003

COMP 3.3.2E

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.

01/12/2003

Insurance undertakings in financial difficulties

COMP 3.3.3

(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.

01/10/2004

COMP 3.3.4

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.

01/12/2003

COMP 3.3.4A

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.

01/12/2003

COMP 3.3.5

[deleted]

(1) [deleted]

(2) [deleted]

01/12/2003

COMP 3.3.6

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.

01/01/2004

Assessing the costs of paying compensation

COMP 3.3.7

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 3.2 FSCS 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.

01/12/2003

COMP 4

Eligible claimants

COMP 4.1

Application and Purpose

01/12/2004

Application

COMP 4.1.1

This chapter applies to the FSCS.

01/12/2001

COMP 4.1.2

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

01/12/2001

Purpose

COMP 4.1.3

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).

01/12/2001

COMP 4.2

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

01/12/2004

COMP 4.2.1

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.

01/12/2001

COMP 4.2.2

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

(1)

Firms (other than a sole trader firm ,; a credit union or a small business whose claim arises out of a regulated activity for which they do not have a permission)

(2)

Overseas financial services institutions

(3)

Collective investment schemes, and anyone who is the operator or trustee of such a scheme

(4)

Pension and retirement funds, and anyone who is a trustee of such a fund (except a trustee of a small self-administered scheme or an occupational pension scheme of an employer which is not a large company , large partnership or large mutual association ).

(5)

Supranational institutions, governments, and central administrative authorities

(6)

Provincial, regional, local and municipal authorities

(7)

Directors and managers of the relevant person in default. However, this exclusion does not apply if:

(a)

both of the following apply:

(i)

the relevant person in default is a mutual association which is not a large mutual association; and

(ii)

the directors and managers do not receive a salary or other remuneration for services performed by them for the relevant person in default, or

(b)

the relevant person in default is a credit union.

(8)

Close relatives of persons excluded by (7) above

(9)

Bodies corporate in the same group as the relevant person in default

(10)

Persons holding 5% or more of the capital of the relevant person in default, or of any body corporate in the samegroup

(11)

The auditors of the relevant person in default, or of anybody corporate in the samegroup as therelevant person in default, or the appointed actuary of a friendly society or insurance undertaking in default

(12)

Persons who, in the opinion of the FSCS, are responsible for, or have contributed to, the relevant person'sdefault

(13)

Large companies or large mutual associations

(14)

Large partnerships

(15)

Persons whose claim arises from transactions in connection with which they have been convicted of an offence of money laundering.

(16)

Persons whose claim arises under the Third Parties (Rights against Insurers) Act 1930

(17)

Where the claim is in relation to a protected contract of insurance or protected non-investment insurance mediation, body corporate, partnerships, mutual associations and unincorporated associations which are not small businesses.

14/01/2005

COMP 4.2.3

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.

01/12/2001

COMP 4.3

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

01/12/2004

Deposits

COMP 4.3.1

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.

01/12/2001

Long term insurance

COMP 4.3.2

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.

01/12/2001

Relevant general insurance contracts

COMP 4.3.3

(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.

01/12/2001

COMP 4.3.4

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.

14/01/2005

COMP 4.3.5

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.

01/12/2001

Liability subject to compulsory insurance

COMP 4.3.6

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:

(1) a claim under a protected contract of insurance; or

(2) a claim in connection with protected non-investment insurance mediation.

01/12/2001

Protected investment business and protected mortgage business

COMP 4.3.7

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

31/10/2004

COMP 5

Protected claims

COMP 5.1

Application and Purpose

01/12/2004

Application

COMP 5.1.1

This chapter applies to the FSCS.

01/12/2001

COMP 5.1.2

It is also relevant to claimants.

01/12/2001

Purpose

COMP 5.1.3

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

01/12/2001

COMP 5.2

What is a protected claim?

01/12/2004

COMP 5.2.1

A protected claim is:

(1) a claim for a protected deposit(see COMP 5.3); or

(2) a claim under a protected contract of insurance (see COMP 5.4); 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

(5) a claim in connection with protected non-investment insurance mediation (see COMP 5.7).

31/10/2004

COMP 5.2.2

[deleted]

13/02/2004

COMP 5.3

Protected deposits

01/12/2004

COMP 5.3.1

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

(d) a non-nominative deposit (that is, a deposit made without disclosing the depositor's identity).

01/12/2001

COMP 5.4

Protected contracts of insurance

01/12/2004

COMP 5.4.1

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)

01/12/2001

Contracts of insurance issued after commencement

COMP 5.4.2

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

(3) is a long-term insurance contract or a relevant general insurance contract;

(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.

01/01/2004

COMP 5.4.3

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.

01/12/2001

COMP 5.4.4

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.

01/12/2001

Contracts of insurance issued before commencement

COMP 5.4.5

(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:

(a) a relevant general insurance contract;

(b) a contract of insurance within the credit class; and

which in each case is not a reinsurance contract.

01/01/2004

Contracts not evidenced by a policy

COMP 5.4.6

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.

01/12/2001

Liabilities giving rise to claims under a protected contract of insurance

COMP 5.4.7

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.

01/12/2003

COMP 5.5

Protected investment business

01/12/2004

COMP 5.5.1

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.

01/12/2001

COMP 5.5.2

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

(b) a UCITS management company established in another EEA State (but only in relation to managing investments (other than of a collective investment scheme), advising on investments or safeguarding and administering investments);

and the claim is an ICD claim; or

(3) both (1) and (2).

13/02/2004

COMP 5.6

Protected mortgage business

01/12/2004

COMP 5.6.1

Protected mortgage business is:

(1) advising on regulated mortgage contracts; or

(2) arranging (bringing about) regulated mortgage contracts; or

(3) making arrangements with a view to regulated mortgage contracts ; or

(4) agreeing to carry on a regulated activity in (1) to (3); or

(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.

31/10/2004

COMP 5.6.2

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.

31/10/2004

COMP 5.7

Protected non-investment insurance mediation

01/12/2004

COMP 5.7.1

Protected non-investment insurance mediation is an insurance mediation activity where the investment concerned is a relevant general insurance contract or a pure protection contract but which is not a long-term care insurance contract or a reinsurance contract, provided that the condition in COMP 5.7.2 Ris satisfied.

14/01/2005

COMP 5.7.2

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.

14/01/2005

COMP 6

Relevant persons in default

COMP 6.1

Application and Purpose

01/12/2004

Application

COMP 6.1.1

This chapter applies to the FSCS.

01/12/2001

COMP 6.1.2

It is also relevant to claimants.

01/12/2001

Purpose

COMP 6.1.3

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.

01/12/2001

COMP 6.1.4

To be eligible for compensation a claimant's claim must be against a relevant person in default: see COMP 3.2.1 R (2).

01/12/2001

COMP 6.2

Who is a relevant person?

01/12/2004

COMP 6.2.1

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

(1) a participant firm; or

(2) an appointed representative of a participant firm.

01/12/2001

COMP 6.2.2

An incoming EEA firm, which is a credit institution, an IMD insurance intermediary, an ISD investment firm or a UCITS management company, and its appointed representatives are not relevant persons in relation to the firm's passported activities, unless it has top-up cover (and in the case of a UCITS management company, only in relation to managing investments (other than of a collective investment scheme), advising on investments or safeguarding and administering investments). (See definition of "participant firm").

14/01/2005

COMP 6.3

When is a relevant person in default?

01/12/2004

COMP 6.3.1

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).

01/12/2001

COMP 6.3.2

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.

01/01/2004

COMP 6.3.3

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's Home 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.

01/01/2004

COMP 6.3.4

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.

31/10/2004

COMP 6.3.5

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.

01/12/2001

Members in default and the Central Fund of the Society

COMP 6.3.6

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.

01/01/2004

COMP 6.3.7

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.

01/01/2004

Claims arising under COMP 3.2.4 R

COMP 6.3.8

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.

14/01/2005

COMP 7

Assignment of rights

COMP 7.1

Application

01/12/2004

Application and Purpose

COMP 7.1.1

This chapter applies to the FSCS.

01/12/2001

COMP 7.1.2

It is also relevant to claimants.

01/12/2001

Purpose

COMP 7.1.3

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.

01/12/2001

COMP 7.2

How does the assignment of rights work?

01/12/2004

COMP 7.2.1

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.

01/12/2001

COMP 7.2.2

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.

01/12/2001

COMP 7.2.3

(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).

01/12/2003

COMP 7.2.4

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).

01/12/2001

COMP 7.2.4A

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.

01/01/2004

COMP 7.2.5

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.

01/12/2001

COMP 7.2.6

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 person in 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 person in 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.

01/12/2001

COMP 7.2.7

(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.

14/01/2005

COMP 8

Rejection of application and withdrawal of offer

COMP 8.1

Application and Purpose

01/12/2004

Application

COMP 8.1.1

This chapter applies to the FSCS.

01/12/2001

COMP 8.1.2

It is also relevant to claimants.

01/12/2001

Purpose

COMP 8.1.3

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.

01/12/2001

COMP 8.2

Rejection of application for compensation

01/12/2004

COMP 8.2.1

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.

01/12/2001

COMP 8.2.2

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.

01/12/2001

COMP 8.2.3

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.

01/12/2001

COMP 8.2.4

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.

31/10/2004

COMP 8.2.5

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.

01/08/2003

COMP 8.2.6

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.

01/08/2003

COMP 8.2.7

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.

01/07/2004

COMP 8.2.8

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.

01/07/2004

COMP 8.3

Withdrawal of offer of compensation

01/12/2004

COMP 8.3.1

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.

01/12/2001

COMP 8.3.2

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.

01/12/2001

COMP 8.3.3

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

01/12/2001

COMP 8.3.4

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

01/12/2001

COMP 8.3.5

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.

01/12/2001

COMP 9

Time limits on payment and postponing payment

COMP 9.1

Application and Purpose

01/12/2004

Application

COMP 9.1.1

This chapter applies to the FSCS.

01/12/2001

COMP 9.1.2

It is also relevant to claimants.

01/12/2001

Purpose

COMP 9.1.3

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.

01/12/2001

COMP 9.2

When must compensation be paid?

01/12/2004

COMP 9.2.1

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.

01/12/2001

COMP 9.2.2

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.

31/10/2004

COMP 9.2.3

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.

01/12/2001

COMP 10

Limits on the amount of compensation payable

COMP 10.1

Application and Purpose

01/12/2004

Application

COMP 10.1.1

This chapter applies to the FSCS.

01/12/2001

COMP 10.1.2

It is also relevant to claimants.

01/12/2001

Purpose

COMP 10.1.3

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.

01/12/2001

COMP 10.1.4

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.

01/12/2001

COMP 10.2

Limits on compensation payable

01/12/2004

COMP 10.2.1

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

01/12/2001

COMP 10.2.2

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.

01/12/2003

COMP 10.2.3

Table Limits

This table belongs to COMP 10.2.1R

Type of claim

Level of cover

Maximum payment

Protected deposit

100% x first £2,000 90% x next £33,000

£31,700

Protected contract of insurance when the contract is a relevant general insurance contract

(1) Where the claim is in respect of a liability subject to compulsory insurance : 100% of claim

Unlimited

(2) Where the claim arises under the Third Party (Rights against Insurers) Act 1930, is in respect of a liability within COMP 5.4.5R(1)(b), and is in connection with an Article 9 default: 90% of the . claim

Unlimited

(3) In all other cases:
100% x first £2,000
90% of remainder of the claim.

Unlimited

Protected contract of insurance when the contract is a long-term insurance contract

100% x first £2,000 At least 90% of the remaining value of the policy as determined in accordance with COMP 12.

Unlimited

Protected investment business

100% x first £30,000 90% x next £20,000

£48,000

Protected mortgage business

100% x first £30,000
90% x next £20,000

£48,000

Protected non-investment insurance mediation

(1) where the claim is in respect of a liability subject to compulsory insurance : 100% of claim

Unlimited

(2) In all other cases: 100% x first £2000 90% of the remainder of the claim

Unlimited

31/10/2004

COMP 10.2.4

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

01/12/2001

COMP 10.2.5

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.

01/12/2001

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

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.

01/01/2004

Claims arising under COMP 3.2.4 R

COMP 10.2.9

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.

14/01/2005

COMP 11

Payment of compensation

COMP 11.1

Application and Purpose

01/12/2004

Application

COMP 11.1.1

This chapter applies to the FSCS.

01/12/2001

COMP 11.1.2

It is also relevant to claimants.

01/12/2001

Purpose

COMP 11.1.3

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.

01/12/2001

COMP 11.2

Payment

01/12/2004

To whom must payment be made?

COMP 11.2.1

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

(2) COMP 11.2.2 R or COMP 11.2.3 R applies.

01/12/2003

COMP 11.2.2

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

(2) a personal pension scheme or other product provider; or

(3) both (1) and (2);

and not to the claimant, unless exceptional circumstances apply.

01/12/2001

COMP 11.2.3

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.

01/10/2004

Reduced or interim payments

COMP 11.2.4

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.

01/12/2003

COMP 11.2.5

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.

01/12/2001

COMP 11.2.6

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.

01/12/2001

COMP 11.2.6A

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.

01/12/2003

Paying interest on compensation

COMP 11.2.7

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

01/12/2001

COMP 11.2.8

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.

01/12/2001

COMP 12

Calculating compensation

COMP 12.1

Application and Purpose

01/12/2004

Application

COMP 12.1.1

This chapter applies to the FSCS.

01/12/2001

COMP 12.1.2

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).

01/12/2001

Purpose

COMP 12.1.3

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

01/12/2001

COMP 12.2

Quantification: general

01/12/2004

COMP 12.2.1

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.

01/12/2001

COMP 12.2.2

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.

01/12/2001

COMP 12.2.3

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.

01/12/2001

Overall net claim

COMP 12.2.4

A claimant's overall net claim is the sum of the protected claims of the same category that he has against a relevant person in 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).

01/12/2001

COMP 12.2.5

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

01/12/2001

COMP 12.2.6

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.

01/12/2001

COMP 12.2.7

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.

01/12/2003

COMP 12.2.8

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.

01/12/2003

COMP 12.2.9

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.

01/01/2004

COMP 12.3

Quantification date

01/12/2004

Protected deposits

COMP 12.3.1

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.

01/12/2001

Protected contracts of insurance

COMP 12.3.2

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.

01/12/2001

COMP 12.3.3

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.

01/12/2001

COMP 12.3.4

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.

01/12/2001

Protected investment business

COMP 12.3.5

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.

01/12/2001

COMP 12.3.6

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.

01/12/2001

Protected mortgage business

COMP 12.3.7

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.

31/10/2004

Protected non-investment insurance mediation

COMP 12.3.8

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.

01/12/2001

COMP 12.4

The compensation calculation

01/12/2004

Protected deposit with incoming EEA firm

COMP 12.4.1

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.

01/12/2001

Protected investment business: general

COMP 12.4.2

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.

01/12/2001

COMP 12.4.3

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.

01/12/2001

COMP 12.4.4

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.

01/12/2001

Protected investment business: claims covered by the pensions review

COMP 12.4.5

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.

01/12/2001

COMP 12.4.6

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.

01/12/2001

Protected investment business: FSAVC Review

COMP 12.4.7

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.

01/12/2001

Protected investment business: excessive benefits

COMP 12.4.8

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).

01/12/2001

Protected contracts of insurance: liabilities subject to compulsory insurance

COMP 12.4.9

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.

01/12/2001

Protected contracts of insurance: general insurance

COMP 12.4.10

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.

01/12/2001

Protected contracts of insurance: long-term insurance

COMP 12.4.11

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.

01/12/2003

COMP 12.4.11A

(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).

01/12/2003

COMP 12.4.12

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.

01/12/2003

COMP 12.4.13

(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.

01/12/2003

COMP 12.4.14

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.

01/12/2003

COMP 12.4.15

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.

01/12/2001

Protected non-investment insurance mediation

COMP 12.4.16

01/12/2001

Protected mortgage business

COMP 12.4.17

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.

31/10/2004

COMP 12.4.18

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

31/10/2004

COMP 12.4.19

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.

31/10/2004

Protected non-investment insurance mediation

COMP 12.4.20

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.

01/12/2001

COMP 12.4.21

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).

01/12/2001

COMP 12.6

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

01/12/2004

Trustees

COMP 12.6.1

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.

01/12/2001

COMP 12.6.2

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.

01/12/2001

COMP 12.6.3

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.

01/12/2001

COMP 12.6.4

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.

01/12/2001

COMP 12.6.5

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.

01/12/2001

COMP 12.6.6

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.

01/12/2001

COMP 12.6.7

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.

01/12/2001

Personal representative

COMP 12.6.8

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.

01/12/2001

Agents

COMP 12.6.9

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.

01/12/2001

Joint claims

COMP 12.6.10

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.

01/12/2001

Foreign law

COMP 12.6.11

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.

01/12/2001

Claims arising under COMP 3.2.4 R

COMP 12.6.12

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.

14/01/2005

COMP 13

Funding

COMP 13.1

Application and Purpose

01/12/2004

Application

COMP 13.1.1

This chapter applies to:

(1) every participant firm;

(2) the FSCS; and

(3) the Society.

01/01/2004

COMP 13.1.2

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.

01/01/2004

COMP 13.1.2A

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).

01/12/2004

Purpose

COMP 13.1.3

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.

01/12/2001

COMP 13.2

General structure

01/12/2004

COMP 13.2.1

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.

01/12/2001

COMP 13.2.2

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.

01/12/2001

COMP 13.2.3

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.

01/12/2001

COMP 13.2.4

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.

01/12/2001

COMP 13.2.5

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.

01/12/2001

The management expenses levy

COMP 13.2.6

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.

01/12/2001

COMP 13.2.7

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.

01/12/2001

COMP 13.2.8

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 person in 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.

01/12/2001

COMP 13.2.9

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.

01/12/2001

COMP 13.2.10

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.

01/12/2001

The compensation costs levy

COMP 13.2.11

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.

01/12/2001

COMP 13.2.12

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.

01/12/2003

COMP 13.2.13

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.

01/12/2001

Incoming EEA firms

COMP 13.2.14

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.

01/12/2001

COMP 13.3

Exemption

01/12/2004

COMP 13.3.1

(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.

01/02/2004

COMP 13.3.1A

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.

14/01/2005

COMP 13.3.1B

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.

14/01/2005

COMP 13.3.4

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.

01/02/2004

COMP 13.3.5

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

01/12/2001

COMP 13.3.6

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.

01/02/2004

COMP 13.3.7

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

01/02/2004

COMP 13.4

The FSCS's power to impose levies

01/12/2004

General limits on levies

COMP 13.4.1

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.

01/12/2001

COMP 13.4.2

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.

01/12/2001

COMP 13.4.3

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

01/12/2001

COMP 13.4.4

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.

01/12/2001

Limits on compensation costs levies on sub-schemes

COMP 13.4.5

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.

01/12/2001

COMP 13.4.6

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.

01/12/2001

COMP 13.4.7

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.

01/12/2001

COMP 13.4.7A

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.

31/10/2004

COMP 13.4.7B

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.

31/10/2004

Levy for compensation costs paid in error

COMP 13.4.8

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.

01/12/2001

Management of funds

COMP 13.4.9

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.

01/12/2001

COMP 13.4.10

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.

01/12/2001

COMP 13.4.11

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.

01/12/2001

COMP 13.4.12

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.

01/12/2001

COMP 13.4.13

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.

01/12/2001

COMP 13.4.14

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.

01/12/2001

COMP 13.4.15

(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.

01/12/2001

COMP 13.4.15A

(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.

01/03/2003

COMP 13.4.16

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.

01/12/2001

COMP 13.4.17

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).

01/12/2001

COMP 13.4.18

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.

01/12/2001

Adjustments to calculation of levy shares

COMP 13.4.19

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.

01/12/2001

Remission of levy or additional administrative fee

COMP 13.4.20

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.

01/03/2003

Levies on the Society of Lloyd's

COMP 13.4.21

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.

01/01/2004

COMP 13.5

Management expenses

01/12/2004

Obligation on participant firm to pay

COMP 13.5.1

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

01/12/2001

Limit on management expenses

COMP 13.5.2

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.

01/12/2001

Participant firm's share

COMP 13.5.3

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.

01/12/2001

COMP 13.5.4

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.

01/12/2001

Base costs levy

COMP 13.5.5

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).

01/12/2001

Specific costs levy

COMP 13.5.6

(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).

18/07/2002

COMP 13.5.7

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.

18/07/2002

New participant firms

COMP 13.5.8

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.

01/12/2001

COMP 13.5.9

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.

01/12/2001

COMP 13.5.10

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.

01/04/2004

Establishment costs levy

COMP 13.5.11

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.

01/12/2001

COMP 13.5.12

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

01/12/2001

COMP 13.6

Compensation costs

01/12/2004

COMP 13.6.1

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.

01/12/2001

COMP 13.6.2

(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).

18/07/2002

COMP 13.6.3

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.

01/12/2001

COMP 13.6.4

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.

01/12/2001

COMP 13.6.5

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.

01/04/2004

COMP 13.6.6

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.

18/07/2002

COMP 13.6.7

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.

31/10/2004

COMP 13.6.8

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))

SUB-SCHEME

CONTRIBUTION GROUP (references to A1, A2 etc are to the FSA fee Blocks)

LEGAL BASIS FOR ACTIVITY (references to articles are to articles of the Regulated Activities Order)

TARIFF BASE

Accepting deposits

A1 - deposit takers

Accepting deposits (article 5)

Protected deposits (see COMP 13.6.13R)

Insurance business

A3 - Insurance activities - General insurance

Effecting contracts of insurance and/or carrying out contracts of insurance (article 9) that are general insurance contracts

Relevant net premium income

Insurance business

A4 - insurance activities - Life Insurance

Effecting contracts of insurance and/or carrying out contracts of insurance (article 9) that are long-term insurance contracts

Relevant net premium income

01/12/2001

COMP 13.6.9

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).

SUB-SCHEME

CONTRIBUTION GROUP (references to A7 etc are to the activity groups in part 1 of SUP 20 Ann 1R)

LEGAL BASIS FOR ACTIVITY (this is merely a summary of the basis in part 1 of SUP 20 Ann 1R; references to articles are to articles of the Regulated Activities Order)

TARIFF BASE (this is merely a summary of the base in part 2 of SUP 20 Ann 1R

Designated investment business

A7 - fund managers

Managing investments (article 33)

Funds under management

Designated investment business

A9 - managers of an AUT, ACDs and depositaries

Any of the following: (a) establishing, operating or winding up a collective investment scheme; (b) acting as a trustee of an authorised unit trust scheme; (c) acting as a depositary, or sole director of an open-ended investment company (article 48)

Gross income

Designated investment business

A10 - dealing as principal

Dealing in investments as principal (article 12).

Number of traders

Designated investment business

A12 - advisory brokers (excluding corporate finance advisers) - holding either client money or assets

Any of the following: (a) dealing in investments as agent (article 19); (b) arranging (bringing about) deals in investments (article 21(1)); (c) making arrangements with a view to transactions in investments (article 22(2)); with permission to: (i) advise on investments (article 49); (ii) hold client money; and (iii) safeguarding and administering investments (article 36)

Number of approved persons

Designated investment business

A13 - advisory brokers (excluding corporate finance adviser) - not holding either client money or assets

Any of the following: (a) dealing in investments as agent (article 19); (b) arranging (bringing about) deals in investments (article 21(1)); (c) making arrangements with a view to transactions in investments (article 22(2)); with permission to advise on investments (article 49); but not to (i) hold client money; and (ii) safeguard and administer investments (article 36).

Number of approved persons

Designated investment business

A14 - corporate finance advisory firms

Permission includes a requirement that the firm must not conduct designated investment business other than corporate finance business

Number of approved persons

01/04/2004

COMP 13.6.9A

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

SUB-SCHEME

CONTRIBUTION GROUP (REFERENCES TO A1, A2 ETC ARE TO THE FSA FEE BLOCKS)

LEGAL BASIS FOR ACTIVITY (references to articles are to articles of the Regulated Activities Order)

TARIFF BASE

Mortgage advice and arranging

A18 - Mortgage lenders, advisers and arrangers

Any of the following: (a) arranging (bringing about) regulated mortgage contracts; (b) making arrangements with a view to regulated mortgage contracts; (c) advising on regulated mortgage contracts; (d) agreeing to carry on a regulated activity which is within any of the above; and (e) 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).

annual eligible income

31/10/2004

COMP 13.6.9B

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

SUB-SCHEME

CONTRIBUTION GROUP (REFERENCES TO A1, A2 ETC ARE TO THE FSA FEE BLOCKS)

LEGAL BASIS FOR ACTIVITY (references to articles are to articles of the Regulated Activities Order)

TARIFF BASE

General insurance mediation

A.19 General insurance mediation

Any of the following in relation to a non-investment insurance contract: (a) dealing in investments as agent; (b) arranging (bringing about) regulated mortgage contracts; (c) making arrangements with a view to transactions in investments; (d) assisting in the administration and performance of a contract of insurance; (e) advising on investments; and (f) agreeing to carry on a regulated activity which is within any of the above

annual eligible income

31/10/2004

COMP 13.6.10

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

01/12/2001

COMP 13.6.11

Unless exempt under COMP 13.3.1 R, a participant firm must provide the FSCS by the end of February each year 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.

01/12/2001

COMP 13.6.12

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.

01/12/2001

COMP 13.6.13

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.

01/12/2001

COMP 13.6.14

Where a participant firm does not provide the statement required by COMP 13.6.11 R, the FSCS may assess the firm for its share of the compensation costs levy or the specific costs levy on any reasonable basis (including on the basis of the statement for the previous year), making such adjustments as seem appropriate in subsequent levies once the true figures are known.

01/12/2001

COMP 13.6A

IFA pensions review compensation levies

01/12/2004

COMP 13.6A.1

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).

18/07/2002

COMP 13.7

Incoming EEA firms

01/12/2004

COMP 13.7.1

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.

14/01/2005

COMP 13.8

Payment of levies

01/12/2004

COMP 13.8.1

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.

01/12/2001

COMP 13.8.2

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.

01/12/2001

COMP 13.8.3

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.

01/12/2001

COMP 13.8.4

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 based on the amount outstanding 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.

01/12/2001

COMP 13.8.5

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.

01/12/2001

COMP 13.8.6

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).

01/12/2001

COMP 13.8.7

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.

01/12/2001

COMP 13 Ann 1

COMP 13 Ann 1R: Management Expenses Levy Limit

01/12/2004

This table belongs to COMP 13.5.2 R

Period

Limit on total of all management expenses levies attributable to that period (£)

1 December 2001 to 1 April 2002

£4,209,000

1 April 2002 to 31 March 2003

£13,228,000

1 April 2003 to 31 March 2004

£13,319,000

1 April 2004 to 31 March 2005

£17,590,000

20/10/2004

COMP 14

Participation by EEA Firms

COMP 14.1

Application and Purpose

01/12/2004

Application

COMP 14.1.1

This chapter applies to the FSCS.

13/02/2004

COMP 14.1.2

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

14/01/2005

Purpose

COMP 14.1.3

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.

14/01/2005

COMP 14.1.4

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.

14/01/2005

COMP 14.1.5

In relation to an incoming EEA firm's passported 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 UK branch 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.

13/02/2004

COMP 14.1.6

If there is no cover provided by the incoming EEA firm's Home 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 UK branch, 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).

01/12/2001

COMP 14.2

Obtaining top-up cover

01/12/2004

COMP 14.2.1

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).

01/12/2001

COMP 14.2.2

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.

01/12/2001

COMP 14.2.3

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

(1) the firm must be a credit institution an IMD reinsurance intermediary or an ISD investment firm or a UCITS management company;

(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.

14/01/2005

COMP 14.2.4

When the FSCS accepts an application, it must allocate the incoming EEA firm 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.

01/12/2001

COMP 14.2.5

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.

01/12/2001

COMP 14.3

Co-operation between the FSCS and Home State compensation schemes

01/12/2004

COMP 14.3.1

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.

01/12/2001

COMP 14.4

Ending top-up cover

01/12/2004

FSCS terminating top-up cover

COMP 14.4.1

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

01/12/2001

COMP 14.4.2

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's Home State regulator.

01/12/2001

COMP 14.4.3

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

01/12/2001

COMP 14.4.4

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

01/12/2001

Resignation of an EEA firm from the compensation scheme

COMP 14.4.5

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.

01/12/2001

Notice to customers

COMP 14.4.6

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 UK branch 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.

01/12/2001

COMP 14.4.7

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.

01/12/2001

COMP 14.4.8

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.

01/12/2001

Transitional Provisions and Schedules

COMP TP 1

Transitional Provisions

COMP TP 1.1

Transitional Provisions Table

(1)

(2)

(3)

(4)

(5)

(6)

Material to which the transitional provision applies

Transitional Provision

Transitional provision: dates in force

Handbook Provisions coming into force

COMP 5

Protected claims

Indefinitely

Commencement

(1)

A claim for a protected deposit or under a protected contract of insurance includes a claim in respect of an article 9 default, subject to (2)

(2)

A claim must be treated as a claim in relation to a protected contract of insurance under COMP 5.4.5 R if the conditions in article 10(1)(a)-(d) of the compensation transitionals order are satisfied.

(3)

A claim in connection with protected investment business includes a claim in respect of a pending application.

(4)

Where the claim is in respect of an article 9 default or a pending application, theFSCSmust apply the rules of therelevant former scheme, as they applied to the default beforecommencement, unless (2) applies.

(5)

The rules of each investment business compensation scheme are amended so that references to the person managing the scheme are replaced by references to the FSCS.

(6)

The rules of the Friendly Societies Protection Scheme are amended so that:

(a)

references to the person managing the scheme are replaced by references to the FSCS; and

(b)

References to functions conferred upon the Friendly Societies Protection Scheme Board are replaced by references to functions conferred upon the FSCS.

(7)

Where the default occurs after commencement, aclaimfor aprotected depositincludes aclaimthat arose beforecommencementin respect of:

(a)

a deposit within the meaning of the Banking Act 1987; and

(b)

a claim in respect of a protected investment within the meaning of section 27 of the Building Societies Act 1986.

(8)

Where the default occurs after commencement, aclaim in connection withprotected investment businessincludes aclaimthat could have been entertained under aninvestment business compensation scheme(provided that the person making the claim has not also made apending applicationarising out of the same set of facts).

COMP 13.5 and COMP 13.6

Funding

Commencement - 31 March 2004

Commencement

(1)

The FSCS must give a participant firm which is a professional firm the following discount on the specific costs levy or compensation costs levy that it would otherwise have to pay:

(a)

75%, if the levy is made between 1 December 2001 and 31 March 2002;

(b)

25%, if the levy is made between 1 April 2002 and 31 March 2003;

(c)

10%, if the levy is made between 1 April 2003 and 31 March 2004.

(2)

The FSCS must reallocate the amount of any discount to the other members of the relevant contribution group, in accordance with the relevant tariff basis inCOMP 13.6.7 R.

COMP 13.4.6 R and COMP 13.6.7 R

Calculation of levies

Commencement - 31 March 2002

Commencement

(1)

Until 31 March 2002, the FSCS must calculate a participant firm's share of a compensation costs levy allocated to the insurance business sub-scheme in accordance with the provisions of the Policyholders Protection Act 1975 (including the provisions relating to net premium income)

(2)

In making the calculation under transitional provision 3R(1), the FSCS may assess a participant firm for its share of a compensation costs levy on any reasonable basis, if the participant firm has not provided the information required under the Policyholders Protection Act 1975, making such adjustments as seem appropriate in subsequent levies once the true figures are known.

COMP 13.5.8 R

Grandfathered Firms

Commencement - 31 March 2002

Commencement

COMP 13.5.8 R (New participant firms) does not apply to a firm that becomes authorised atcommencementunder the Financial Services and Markets Act 2000 (Transitional Provisions) (Authorised Persons etc.) Order 2001.

COMP 6.2.1 R

Credit unions

Indefinitely

Commencement

In relation to a claim or potential claim referred to in (1) or (2), a relevant person is also any credit union which:

(1)

becomes unable, or is likely to become unable, to satisfy claims against it which relate to deposits which were accepted before 2 July 2002; or

(2)

(a)

has ceased to have Part IV permission by virtue of article 3(4) of the Financial Services and Markets Act 2000 (Permission and Applications) (Credit Unions etc.) Order 2002 (SI 2002/704) (failure to comply with a direction to re-apply for Part IV permission); and

(b)

thereafter, becomes unable, or is likely to become unable, to satisfy claims against it which relate to deposits which were accepted on or after 2 July 2002 but before the date on which it ceased to have Part IV permission.

COMP 6.2.1 R

In consequence of transitional provision 5R, compensation can be provided:

(a)

in respect of a credit union which is unable, or likely to become unable, to satisfy claims for protected deposits accepted before 2 July 2002; and

(b)

where a credit union has ceased to hold a Part IV permission (because of failure to comply with a direction to re-apply for the Part IV permission), for protected deposits accepted on or after 2 July 2002 but before the date at which it ceased to have the Part IV permission.

COMP 6.2.1 R

In consequence of transitional provision 5R(1), a credit union becomes a relevant person in respect of deposits accepted before 2 July 2002.

Amendments introduced by the Compensation Sourcebook (Amendment No.2) Instrument 2003.

Provisions and definitions arising out of (2) only apply to defaults, or circumstances giving rise to arrangements made under COMP 3.3.1 R or to measures taken under COMP or to measures taken under COMP 3.3.3 R, occurring after the date in (6)

Indefinitely

1 December 2003

COMP 13.6.8 R

With regard to a member, relevant net premium income is to include the premium income in respect of contracts of insurance:
(a) entered into by the member in the year preceding that in which the date for submission of the information under COMP 13.6.11 R falls: and
(b) which would have been protected contracts of insurance if entered into on or after I January 2004; net of any relevant rebates or refunds.

1 January 2004 to 1 January 2005

Commencement

COMP 5.7.1 R, COMP 13.4.7 R and COMP 13.6.9 R

Rules not in effect.

31 October 2004 to 13 January 2005

31 October 2004

COMP 13.4.1 R, COMP 13.4.19 R, COMP 13.5.8 R, COMP 13.5.6 R, COMP 13.6.1 R and COMP 13.6.6 R

With regard to contribution group A.18 Mortgage lenders, advisers and arrangers, the management expenses levy and compensation costs levy for 2005/2006 may also take account of expenditure in the period 31 October 2004 to 31 March 2005.

31 October 2004 to 31 March 2006

31 October 2004

COMP 13.4.1 R, COMP 13.4.19 R, COMP 13.5.6 R, COMP 13.5.8 R, COMP 13.6.1 R and COMP 13.6.6 R

With regard to contribution group A.19 General insurance mediation, the management expenses levy and compensation costs levy for 2005/2006 may also take account of expenditure in the period 14 January 2005 to 31 March 2005.

14 January 2005 to 31 March 2006

31 October 2004

COMP 13.6.7 R (4) COMP 13.6.9A R and COMP 13.6.11 R (2)

For the period 31 October 2004 to 31 March 2006 the tariff base will be the annual income (relating to the relevant contribution group) reported in accordance with note 3 to AUTH 4 Annex 2 R or, if the firm prefers, that amount of its annual income which is attributable to business conducted with eligible claimants but only if the firm notifies FSCS of the amount by 28 February 2005.

31 October 2004 to 31 March 2006

31 October 2004

COMP 13.6.7 R (5), COMP 13.6.9B R and COMP 13.6.11 R (2)

For the period 14 January 2005 to 31 March 2006 the tariff base will be the annual income (relating to the relevant contribution group) reported in accordance with note 3 to AUTH 4 Annex 2 R or, if the firm prefers, that amount of its annual income which is attributable to business conducted with eligible claimants but only if the firm notifies FSCS of the amount by 28 February 2005.

14 January 2005 to 31 March 2006

31 October 2004

01/12/2004

COMP Sch 1

Record-keeping requirements

01/12/2004

COMP Sch 1.1

The aim of the guidance in the following able is to give the reader a quick overall view of the relevant record keeping requirements. The Rules listed below apply only to FSCS (the scheme manager).

It is not a complete statement of those requirements and should not be relied upon as it were.

01/12/2004

COMP Sch 1.2

Handbook reference

Subject of record

Contents of record

When record must be made

Retention period

COMP 13.4.12 R

FSCS funding

Full details of the movement of funds within sub-schemes.

Ongoing requirement.

N/A

01/12/2004

COMP Sch 2

Notification requirements

01/12/2004

COMP Sch 2.1

The aim of the guidance in the following table is to give the reader a quick overall view of the relevant requirements for notification and reporting. In all cases, other than those concerning Chapter 13 and Chapter 14, the notification rules in COMP apply only to FSCS (the scheme manager).

It is not a complete statement of those requirements and should not be relied on as if it were.

01/02/2004

COMP Sch 2.2

Handbook reference

Matter to be notified

Contents of notification

Trigger event

Time allowed

COMP 2.2.5G

Annual Report

Not specified in COMP - see Memorandum of Understanding (MoU) between FSAand FSCS

End of Financial Year

Not specified in COMP (see MoU)

COMP 2.2.7R

Default of relevant person

Not specified - although FSCS must take appropriate steps to ensure claimants are informed about how they can claim compensation

default of a relevant person

Not specified - but as soon as practicable after determining default

COMP 13.3.1R

Right to exemption for specific costs and compensation costs levy

Notice that firm does not conduct business that could give rise to a claim on the FSCS and has no reasonable likelihood of doing so

If it does not, or if it ceases to, conduct business with persons eligible to claim on FSCS, unless it has already given such notice

None specified though exemption generally only takes effect from the date of receipt of notice by FSCS

COMP 13.3.4R

Loss of right to seek exemption from specific costs & compensation costs levy

Statement that firm no longer qualifies for exemption because it carries on business with persons eligible to claim on FSCS

Firm loses the right to claim the exemption.

As soon as reasonably practicable

COMP 13.6.11R

Levy base for participant firm

The contribution groups to which the participant firm belongs. The total amount of business (measured in accordance with the appropriate tariff bases, which it conducted as at 31 December of the previous year)

The end of the calendar year (the occasion of 31 December every year beginning with 31 December 2001)

By end February

COMP 13.8

Participant firms compensation levy for the financial year

Amount of levy payable by the participant firm

The decision by the FSCS that it must impose a levy

30 days before the levy is payable

COMP 14.2.1R

Application by eligible inward passporting EEA firm to obtain top-up cover into compensation scheme

That firm is qualifying incoming EEA firm. The sub-scheme(s) the firm wishes to participate in. Confirmation that the level or scope of cover offered by its home state scheme(s) is less than that available in the UK.

The firm's decision that it wishes to obtain top-up cover into the UK scheme.

N/A

COMP 14.4.5R

Termination of top-up cover

Statement that incoming EEA firm is terminating top-up cover

Decision by firm to resign from FSCS

6 months notice

COMP 14.4.6R

Termination of inward passporting EEA firm's top-up cover into compensation scheme

The firm's resignation from the compensation scheme and the level of compensation available to clients of the firm's UK branch following its decision to resign from FSCS

Termination of firm's top-up cover

No later than six weeks after the end of the firms participation in compensation scheme

01/02/2004

COMP Sch 3

Fees and other required payments

01/12/2004

COMP Sch 3.1

The rules in COMP 13 give FSCS (the scheme manager) the power to raise levies on participant firms in order to meet its expenses. The rules in COMP 13 do not specify the amount of any levy but do specify how a participant firm's share of a levy is to be calculated and any limit on the amount leviable by the FSCS is a particular period.

01/12/2004

COMP Sch 4

Powers Exercised

01/12/2004

COMP Sch 4.1

The following powers and related provisions in or under the Act and the Financial Services and Markets Act 2000 (Transitional Provisions, Repeals and Savings) (Financial Services Compensation Scheme) Order 2001 ("the compensation transitionals order") have been exercised by the FSA to make the rules in COMP:

Section 138 (General rule-making power)

Section 156 (General supplementary powers)

Section 213 (The compensation scheme)

Section 214 (General)

Section 215 (Rights of the scheme in relevant person's insolvency)

Section 216 (Continuity of long-term insurance policies)

Section 217 (Insurers in financial difficulties)

Section 218 (Annual report)

Section 223 (Management expenses)

Article 4 (Pending Applications) of the compensation transitionals order

Article 6 (Post-commencement applications) of the compensation transitionals order

Article 9 (Article 9 defaults occurring before commencement) of the compensation transitionals order

Article 10 (Applications in respect of compulsory liability insurance) of the compensation transitionals order

Article 12 (Applications under the new scheme) of the compensation transitionals order

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COMP Sch 4.2

The following additional powers have been exercised by the FSA to make the rules in COMP:

Articles 3 (Further power for Authority to make rules concerning mesothelioma claims) and 4 (Modification of FSMA in relation to FSA rules for mesothelioma claims) of the mesothelioma regulations.

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COMP Sch 4.3

The following powers in the Act have been exercised by the FSA to give the guidance in COMP:

Section 157(1) (Guidance)

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COMP Sch 5

Rights of action for damages

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COMP Sch 5.1

The table below sets out the rules in COMP, contravention of which by an authorised person may be actionable under section 150 of the Act (Actions for damages) by a person who suffers loss as a result of the contravention.

If a "yes" appears in the column headed "For private person?", the rule may be actionable by a "private person" under section 150 unless a "yes" appears in the column headed "Removed". A "yes" in the column headed "Removed" indicates that the FSA has removed the right of action under section 150(2) of the Act. If so, a reference to the rule in which it is removed is also given.

In accordance with the Financial Services and Markets Act 2000 (Rights of Action) Regulations 2001 (SI 2001/2256) a "private person" is:

any individual, except when acting in the course of carrying on a regulated activity; and

any person who is not an individual, except when acting in the course of carrying on business of any kind;

but does not include a government, local authority or an international organisation.

The column headed "For other person?" indicates whether the rule is actionable by a person other than a private person, in accordance with those Regulations. If so, an indication of the type of person by whom the rule is actionable is given.

The vast majority of rules in COMP are rules to which the FSCS is subject. No right of action arises under section 150 for breach of these rules, as the FSCS is not an authorised person.

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COMP Sch 5.2

Chapter/Appendix

Section/Annex

Paragraph

For private person?

Removed

For other person?

COMP 13

Funding (all rules)

Yes

COMP 14.4.6R

Yes

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COMP Sch 6

Rules that can be waived

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COMP Sch 6.1

The rules in COMP cannot be waived by the FSA, except:

(1) COMP 13.6.11 R;

(2) COMP 14.4.6 R

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