Relevant persons in default

Part

COMP Compensation Sourcebook

Chapter

Relevant persons in default

Printed on: 14/12/2024

Rulebook at: 01/10/2009

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, a MiFID 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").

01/11/2007

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 6.3.1A

The FSA will make the determination in COMP 6.3.1 R (2)(a) in relation to a DGD claim as soon as possible and in any event no later than five working days after being satisfied that either of the conditions in COMP 6.3.2 R has been met.

[Note: article 1(3)(i) of the Deposit Guarantee Directive]

30/06/2009

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, protected home finance mediation 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.

06/04/2007

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