Part

COMP Compensation Sourcebook

Chapter

Relevant persons in default

Printed on: 14/11/2024

Rulebook at: 23/07/2013

COMP 6

Relevant persons in default

COMP 6.1

Application and Purpose

  • 01/12/2004

Application

COMP 6.1.1

handbook-rule
This chapter applies to the FSCS.
  • 01/04/2013

COMP 6.1.2

handbook-guidance
It is also relevant to claimants.
  • 01/04/2013

Purpose

COMP 6.1.3

handbook-guidance
The purpose of this chapter is to specify the types of person against whom a claimant must have a claim in order to be eligible for compensation, and when those persons are 'in default'. Generally, this occurs when they are insolvent or unable to meet their liabilities to claimants.
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COMP 6.1.4

handbook-guidance
To be eligible for compensation a claimant's claim must be against a relevant personin default: see COMP 3.2.1 R (2).
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COMP 6.2

Who is a relevant person?

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COMP 6.2.1

handbook-rule
A relevant person is a person who was, at the time the act or omission giving rise to the claim against it took place:
(1) a participant firm; or
(2) an appointed representative of a participant firm.
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COMP 6.2.2

handbook-guidance
(1) An incoming EEA firm, which is a credit institution, an IMD insurance intermediary or a MiFID investment firm, and its appointed representatives are not relevant persons in relation to the firms'spassported activities, unless it has top-up cover. (See definition of "participant firm").
(2) An EEA UCITS management company providing collective portfolio management services for a UCITS scheme from a branch in the United Kingdom or under the freedom to provide cross border services, is a relevant person to the extent that it carries on those services.
(3) An EEA UCITS management company carrying on the activities of managing investments (other than collective portfolio management), advising on investments or safeguarding and administering investments, is not a relevant person in relation to those activities, unless it has top-up cover.
(4) An incoming EEA AIFM managing an authorised AIF from a branch in the UK or under the freedom to provide cross-border services, is a relevant person in respect of that activity.
(5) An incoming EEA AIFM managing an unauthorised AIF is not a relevant person in respect of that activity unless it has top-up cover.
(6) An incoming EEA AIFM providing the services in article 6(4) of AIFMD is not a relevant person in relation to those activities, unless it has top-up cover.
  • 23/07/2013

COMP 6.3

When is a relevant person in default?

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COMP 6.3.1

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

if a relevant person is in default in relation to an ICD claim or a DGD claim it shall be deemed to be in default in relation to any other type of protected claim.
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COMP 6.3.1A

handbook-guidance
The PRA 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]
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COMP 6.3.2

handbook-rule
Subject to COMP 3.3.3 R to COMP 3.3.6 R and COMP 6.3.6 R, the FSCS (or, where COMP 6.3.1 R(2)(a) applies, the appropriate regulator) may determine a relevant person to be in default when it is, in the opinion of the FSCS or the appropriate regulator:
(1) unable to satisfy protected claims against it; or
(2) likely to be unable to satisfy protected claims against it.
  • 01/04/2013

COMP 6.3.3

handbook-rule
Subject to COMP 6.3.6 R the FSCS may determine a relevant person to be in default if it is satisfied that a protected claim exists (other than an ICD claim or DGD claim), and the relevant person is the subject of one or more of the following proceedings in the United Kingdom (or of equivalent or similar proceedings in another jurisdiction):
(1) the passing of a resolution for a creditors' voluntary winding up;
(2) a determination by the relevant person'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.
  • 01/04/2013

COMP 6.3.5

handbook-rule
For claims arising in connection with protected contracts of insurance, the FSCS must treat any term in an insurance undertaking's constitution or in its contracts of insurance, limiting the undertaking's liabilities under a long-term insurance contract to the amount of its assets, as limiting the undertaking's liabilities to any claimant to an amount which is not less than the gross assets of the undertaking.
  • 01/04/2013

Members in default and the Central Fund of the Society

COMP 6.3.6

handbook-rule
The FSCS may not declare a member to be in default unless it is satisfied that the amounts which the Society may provide from the Central Fund are or are likely to be insufficient to ensure that claims against the member under a protected contract of insurance will be met to the level of protection which would otherwise be available under this sourcebook.
  • 01/04/2013

COMP 6.3.7

handbook-guidance
If a member is unable fully to meet protected claims against it then in the first instance any shortfall will be avoided by payments by the Society from the assets of the Central Fund. The FSCS will not consider claims for compensation unless it is satisfied that the amounts which the Society will make available from the Central Fund are or are likely to be insufficient to ensure that claims against the member under a protected contract of insurance will be met to the level of protection which would otherwise be available under this sourcebook. The amount which the FSCS may pay in respect of any such claim will be limited to the difference between the amount which the claimant will receive, or is expected to receive, from the member and the Society together and the maximum amount of compensation payable in accordance with COMP 10 and COMP 12.
  • 01/04/2013

Scheme manager's power to require information

COMP 6.3.9

handbook-rule
For the purposes of sections 219(1A)(b) and (d) of the Act (Scheme manager's power to require information) whether a relevant person is unable or likely to be unable to satisfy claims shall be determined by reference to whether it is in default.
  • 01/04/2013