Prudential Regulation Authority Rulebook

The Act requires the PRA to make rules establishing a scheme for compensating consumers in cases where: (i) authorised firms are unable, or likely to be unable, to satisfy claims against them; or (ii) persons who have assumed responsibility for liabilities arising from acts or omissions of authorised firms ("successors") are unable, or likely to be unable, to satisfy claims against the successors that are based on those acts or omissions. 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 PRA will use to meet its statutory objectives. This module of the PRA Handbook contains the rules and guidance that allow the Financial Services Compensation Scheme Limited to pay claims for compensation or secure continuity of insurance when an authorised person is unable or likely to be unable to meet claims against it. The rules specify who is eligible to receive compensation and in what circumstances, how much compensation can be paid to a claimant; and how the scheme will be funded. The compensation rules are of interest to consumers. The rules apply to the FSCS and to authorised firms.

The Sourcebook is divided into 17 Chapters covering all aspects of the scheme:

Chapter 1: Introduction and Overview
This chapter provides an introduction to the FSCS rules and a table of question and answers that may be of interest to consumers.

Chapter 2: The FSCS
This chapter gives the FSCS the duty to administer the compensation scheme. It also sets out the general conditions the FSCS must follow when administering the scheme such as having regard to the efficient and economic use of resources, the requirement to publish an Annual Report, and the duty to ensure consumers are informed about how they can make a claim. The rules in this chapter also require the FSCS to have in place procedures for dealing with complaints.

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

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

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

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

Chapter 7 Assignment or subrogation of rights
This chapter enables the FSCS to make an offer of compensation conditional on the claimant assigning to it their rights to claim against the failed firm. If the FSCS recovers from the firm a greater sum than it has paid to the claimant, it must pay the balance to the claimant.

Chapter 8 Rejection of application and withdrawal of offer
This chapter allows the FSCS to reject an application for compensation or withdraw an offer of compensation in specified circumstances.

Chapter 9 Time limits on payment and postponing payment
This chapter requires the FSCS to pay a claim for compensation within a specified time unless specified conditions apply.

Chapter 10 Limits on the amount of compensation payable
This chapter specifies the maximum amount of compensation the FSCS can pay to a claimant, and the limits on the FSCS's duty to secure continuity of insurance for policyholders. Different limits apply depending on whether a claim is for a deposit, a claim on an insurance policy, or a claim in connection with an investment.

Chapter 11 Payment of compensation
This chapter specifies to whom the FSCS may pay compensation. In certain circumstances compensation may be paid to a person other than the claimant.

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

Chapter 13 Funding
Chapter 13 relating to the funding of the FSCS has now been deleted. The funding provisions for the FSCS are now contained in FEES 6 instead and allow the FSCS to make levies on authorised firms to fund the operation of the scheme, to pay compensation or secure continuity of insurance. FEES 6 specifies how FSCS can make levies, how costs are to be allocated, the maximum the FSCS can levy in any particular period of time, and how sums recovered from failed firms are to be treated.

Chapter 14 Participation by EEA firms
This chapter sets out the way the FSCS deals with incoming EEA firms who may choose to top-up into the FSCS to supplement the compensation available from their home state scheme.

Chapter 15 Protected deposits: Payments from other schemes
This chapter provides for the FSCS to have the power to pay compensation on behalf of another compensation scheme or government and to recover the sums paid.

Chapter 16 Disclosure requirements for firms that accept deposits
This chapter sets out the format, frequency and method of communication that deposit-taking firms must use in informing eligible customers that their deposits are covered by the FSCS. It also requires deposit-taking firms to inform their customers if their deposits are not covered by the FSCS.

Chapter 17 Systems and information requirements for firms that accept deposits
This chapter sets out the information required by the FSCS to make deposit compensation payments to eligible depositors. This chapter also sets out the electronic requirements connected to the information contained within each Single Customer View, including the requirement to flag eligible depositor accounts, aggregate accounts held by each eligible depositor to provide a consistent view of each eligible depositor, perform a limit check on each aggregated Single Customer View and enable the electronic submission of the Single Customer View to the FSCS. This chapter also outlines a threshold below which the electronic requirements connected to the Single Customer View are not mandatory.