COMP 7
Assignment or subrogation of rights
COMP 7.1
Application
- 01/12/2004
Application and Purpose
COMP 7.1.1
See Notes
This chapter applies to the FSCS.
- 01/04/2013
COMP 7.1.2
See Notes
It is also relevant to claimants.
- 01/04/2013
Purpose
COMP 7.1.3
See Notes
The FSCS may (and in some cases must) make an offer of compensation conditional on the assignment of rights to it by a claimant. The FSCS may also be subrogated automatically to the claimant's rights.The purpose of this chapter is to make provision for and set out the consequences of an assignment or subrogation of the claimant's rights.
- 01/04/2013
COMP 7.2
How does the assignment of rights work?
- 01/12/2004
COMP 7.2.1
See Notes
The FSCS:
(1) must or if the FSCS is subrogated automatically to the claimant's rights may make any payment of compensation to a claimant, in respect of a protected deposit, conditional on the claimant, in so far as able to do so, assigning the whole of his rights; and
(2) may make any payment of compensation to a claimant in respect of any other 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.- 01/04/2013
COMP 7.2.2
See Notes
- 01/04/2013
COMP 7.2.3
See Notes
(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 (see COMP 7.4.2 R).
(2) [deleted] [Editor's Note: The text of this sub-paragraph has been moved to new COMP 7.4.1 R.]
(3) [deleted]
- 01/04/2013
COMP 7.3
Automatic subrogation
- 01/10/2012
COMP 7.3.1
See Notes
The FSCS's powers in this section apply to all claims except those under protected contracts of insurance.
- 01/04/2013
COMP 7.3.2
See Notes
The FSCS's powers in this section may be used:
(1) separately or in any combination as an alternative and in substitution for the powers and processes elsewhere in this sourcebook;
(2) [deleted]
(3) in relation to all or any part of a protected claim or class of protected claim made with respect to the relevant person; and/or
(4) (where the FSCS uses its powers to administer the payment of compensation on behalf of, or to pay compensation or make a payment on account or an advance and recover from, a Non-UK Scheme or Other Funder (see COMP 15.1.14 R)) in respect of all or part of any protected deposit which is compensatable by and/or recoverable from the Non-UK Scheme or Other Funder, and the FSCS may make different provision for those parts of a protected deposit (and references to paying compensation shall be treated as referring to making a payment, making a payment on account or making an advance as appropriate) (for the purposes of this section the terms "Non-UK Scheme" and "Other Funder" have the same meaning as in COMP 15.1.14 R).
- 01/04/2013
COMP 7.3.3
See Notes
- 01/04/2013
Determinations by the FSCS
COMP 7.3.4
See Notes
(1) Any power conferred on the FSCS to make determinations under this section is exercisable in writing.
(2) An instrument by which the FSCS makes the determination must specify the provision under which it is made, the date and time from which it takes effect and the relevant person and protected claims, parts of protected claims and/or classes of protected claims in respect of which it applies.
(3) The FSCS must take appropriate steps to publish the determination as soon as possible after it is made. Such publication must be accompanied by a statement explaining the effect of COMP 7.4.2 R.
(4) Failure to comply with any requirement in this rule does not affect the validity of the determination.
(5) A determination by the FSCS under this section may be amended, remade or revoked at any time and subject to the same conditions.
- 01/04/2013
Verification of determinations
COMP 7.3.5
See Notes
(1) The production of a copy of a determination purporting to be made by the FSCS under this section:
(a) on which is endorsed a certificate, signed by a member of the FSCS's staff authorised by it for that purpose; and
(b) which contains the required statements;
is evidence (or in Scotland sufficient evidence) of the facts stated in the certificate.(2) The required statements are:
(a) that the determination was made by the FSCS; and
(b) that the copy is a true copy of the determination.
(3) A certificate purporting to be signed as mentioned in (1) is to be taken to have been properly signed unless the contrary is shown.
- 01/04/2013
Effect of this section on other provisions in this sourcebook etc
COMP 7.3.6
See Notes
Other provisions in this sourcebook and FEES 6 are modified to the extent necessary to give full effect to the powers provided for in this section.
- 01/04/2013
COMP 7.3.7
See Notes
- 01/04/2013
Rights and obligations against the relevant persons and third parties
COMP 7.3.8
See Notes
The FSCS may determine that:
(1) the payment of compensation by the FSCS; and/or
(2) the following actions by the FSCS (under COMP 15.1.14 R):
shall have all or any of the following effects:(a) administering the payment of compensation on behalf of; and/or
(b) paying and/or making a payment on account of compensation from;
a Non-UK Scheme or Other Funder;(3) the FSCS shall immediately and automatically be subrogated, subject to such conditions as the FSCS determines are appropriate, to all or any part (as determined by the FSCS) of the rights and claims in the United Kingdom and elsewhere of the claimant against the relevant person and/or any third party (whether such rights are legal, equitable or of any other nature whatsoever and in whatever capacity the relevant person or third party is acting) in respect of or arising out of the claim in respect of which the payment of or on account of compensation was made;
(4) the FSCS may claim and take legal or any other proceedings or steps in the United Kingdom or elsewhere to enforce such rights in its own name or in the name of, and on behalf of, the claimant or in both names against the relevant person and/or any third party;
(5) the subrogated rights and claims conferred on the FSCS shall be rights of recovery and claims against the relevant person and/or any third party which are equivalent (including as to amount and priority and whether or not the relevant person is insolvent) to and not exceed the rights and claims that the claimant would have had; and/or
(6) such rights and/or obligations (as determined by the FSCS) as between the relevant person and the claimant arising out of the protected claim in respect of which the payment was made shall be transferred to, and subsist between, another authorised person with an appropriate permission and the claimant provided that the authorised person has consented (but the transferred rights and/or obligations shall be treated as existing between the relevant person and the FSCS to the extent of any subrogation, transfer or assignment for the purposes of (3) to (5) and COMP 7.3.9 R).
- 01/04/2013
COMP 7.3.9
See Notes
The FSCS may alternatively or additionally make the actions in COMP 7.3.8R (1) and (2) conditional on the claimant assigning or transferring the whole or any part of all such rights as he may have against the relevant person and/or any third party (including, for the avoidance of any doubt, any Non-UK Scheme or Other Funder) on such terms as the FSCS determines are appropriate.
- 01/04/2013
COMP 7.3.10
See Notes
(1) The FSCS may determine that:
(a) if the claimant does not assign or transfer his rights under COMP 7.3.9 R;
(b) if it is impractical to obtain such an assignment or transfer; and/or
(c) if it is otherwise necessary or desirable in conjunction with the exercise of the FSCS's powers under COMP 7.3.8 R or COMP 7.3.9 R or COMP 15.1.19 R;
that claimant shall be treated as having irrevocably and unconditionally appointed the chairman of the FSCS for the time being to be his attorney and agent and on his behalf and in his name or otherwise to do such things and execute such deeds and documents as may be required under such laws of the United Kingdom, another EEA State or any other state or law-country to create or give effect to such assignment or transfer or otherwise give full effect to those powers.(2) The execution of any deed or document under (1) shall be as effective as if made in writing by the claimant or by his agent lawfully authorised in writing or by will.
- 01/04/2013
COMP 7.4
Duty on FSCS to pursue recoveries
- 01/10/2012
COMP 7.4.1
See Notes
If the FSCS takes assignment or transfer of rights from the claimant or is otherwise subrogated to the rights of the claimant, it must pursue all and only such recoveries as it considers are likely to be both reasonably possible and cost effective to pursue.
- 01/04/2013
COMP 7.4.2
See Notes
- 01/04/2013
COMP 7.5
Recoveries: protected deposits
- 01/10/2012
COMP 7.5.1
See Notes
If the FSCS, in relation to a claim for a protected deposit, makes recoveries from the relevant person or any third party in respect of that protected deposit the FSCS must:
(1) retain from those recoveries a sum equal to the "FSCS retention sum"; and
(2) as soon as reasonably possible after it makes the recoveries, pay to the claimant, or as directed by the claimant, a sum equal to the "top up payment".
- 01/04/2013
COMP 7.5.2
See Notes
The FSCS must calculate "FSCS retention sum" and the "top up payment" as follows:
(1) calculate the "recovery ratio" of:
(a) the amount recovered by the FSCS through rights assigned or transferred or otherwise subrogated (taking into account any deduction from that amount the FSCS may make to cover part or all of its reasonable costs of recovery and of distribution, if any); to
(b) the claimant's overall claim for protected deposits against the relevant person in default less any liability of a Home State deposit guarantee scheme;
(2) subtract the sum paid by the FSCS as compensation and any amount paid or payable by a Home State compensation scheme to the claimant from the total value of the claimant's overall claim for protected deposits, to give the "compensation shortfall";
(3) apply the recovery ratio to the sum paid by the FSCS as compensation to the claimant, to give the "FSCS retention sum"; and
(4) apply the recovery ratio to the compensation shortfall, to give the "top up payment".
- 01/04/2013
COMP 7.5.3
See Notes
(1) For example, if the claimant's overall claim for protected deposits against a relevant person was for £120,000, and the FSCS paid compensation of £85,000 and took assignment of all the claimant's rights in relation to that claim, and made recoveries through those rights in the sum of £96,000 (after the costs of recovery and of distribution), then:
(a) the recovery ratio would be 80% (£96,000 ÷ £120,000);
(b) the compensation shortfall would be £35,000 (£120,000 - £85,000);
(c) the FSCS retention sum would be £68,000 (80% x £85,000);
(d) the top up payment would be £28,000 (80% of £35,000);
(e) the total payment to the claimant would be £113,000 (£85,000 of compensation plus £28,000 of top up payment); and
(f) the total outlay by the FSCS, net of the FSCS retention sum, would be £17,000 (20% x £85,000).
(2) In the example above, the amount recovered exceeds the amount of compensation. However, COMP 7.5.1 R also applies where the amount recovered is less than the amount of compensation. Therefore, for example, if the claimant's overall claim for protected deposits against a relevant person was for £120,000, and the FSCS paid compensation of £85,000 and took assignment of all the claimant's rights in relation to that claim, and made recoveries through those rights in the sum of £24,000 (after the costs of recovery and of distribution), then:
(a) the recovery ratio would be 20% (£24,000 ÷ £120,000);
(b) the compensation shortfall would be £35,000 (£120,000 - £85,000);
(c) the FSCS retention sum would be £17,000 (20% x £85,000);
(d) the top up payment would be £7,000 (20% of £35,000);
(e) the total payment to the claimant would be £92,000 (£85,000 of compensation plus £7,000 of top up payment); and
(f) the total outlay by the FSCS, net of the FSCS retention sum, would be £68,000 (80% x £85,000).
- 01/04/2013
COMP 7.5.4
See Notes
In order to prevent a claimant suffering 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, the FSCS shall apply the rule in COMP 12.2.7R (2).
- 01/04/2013
COMP 7.6
Recoveries: claims other than for protected deposits
- 01/10/2012
COMP 7.6.1
See Notes
If the FSCS makes recoveries in relation to a claim that is not for a protected deposit, it may deduct from any recoveries paid over to the claimant under COMP 7.6.2 R part or all of its reasonable costs of recovery and distribution (if any).
- 01/04/2013
COMP 7.6.2
See Notes
Unless compensation was paid under COMP 9.2.3 R or the claim was for a protected deposit, if a claimant assigns or transfers his rights to the FSCS or a claimant's rights and claims are otherwise subrogated to the FSCS and the FSCS subsequently makes recoveries through those rights or claims, 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 COMP 11.2.7 R) 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 failure to pay any sums recovered to the claimant would leave a claimant who had promptly accepted an offer of compensation or whose rights and claims had been subrogated to the FSCS at a disadvantage relative to a claimant who had delayed accepting an offer of compensation or whose claims had not been subrogated (see COMP 7.6.4 R).
- 01/04/2013
COMP 7.6.3
See Notes
For the purpose of COMP 7.6.2 R compensation received by eligible claimants in relation to Lloyd's policies may include payments made from the Central Fund.
- 01/04/2013
COMP 7.6.4
See Notes
Except for a claim for a protected deposit, 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 or from the subrogation of his rights and claims to the FSCS compared with what might have been the position had he delayed his acceptance or had his claims not been subrogated.
- 01/04/2013
COMP 7.6.5
See Notes
As an example of the circumstances which COMP 7.6.4 R is designed to address, take two claimants, A and B.
(1) Both A and B have a protected investment business claim of £60,000 against a relevant personin default. The FSCS offers both claimants £50,000 compensation (the maximum amount payable for such claims under 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 £50,000 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 £10,000, being the difference between his claim of £60,000 and the compensation paid by the FSCS of £50,000.
- 01/04/2013