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COMP 1.1 Application, Introduction, and Purpose

Application

COMP 1.1.1 G

This chapter is relevant to:

  1. (1)

    the FSCS;

  2. (2)

    eligible claimants; 4

  3. (3)

    firms; and4

  4. (4)

    successors.4

COMP 1.1.2 G

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 FEES 61). It also describes how the FSCS is to calculate compensation in particular cases (see COMP 12).

1
COMP 1.1.3 G

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.

COMP 1.1.4 G

Firms will be particularly interested in 1FEES 61, which deals with levies, 4and COMP 1.6.1R, which requires firms to deal with the FSCS in an open, cooperative and timely way4.

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Introduction

COMP 1.1.5 G

The FSA established the Financial Services Compensation Scheme Limited, a company limited by guarantee (FSCS). The FSCS exercises5 the functions that are conferred on the scheme manager5 by Part XV of the Act, dealing with compensation.

5 5 5
COMP 1.1.6 G

The appropriate regulator 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.

Purpose

COMP 1.1.7 G

The FSCS will only pay claims if a firm or a successor4is unable or likely to be unable to meet claims against it because of its financial circumstances. If a firm (or, where applicable, a successor) 4is still trading and has sufficient financial resources to satisfy a claim, the firm (or, where applicable, the successor) 4will 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.

COMP 1.1.8 G

COMP 1 consists of guidance which is aimed at giving an overview of how this sourcebook works. The provisions of COMP 2 to COMP 172 cover who is eligible, the amount of compensation and how it might be paid, disclosure requirements for firms that accept deposits and systems and information requirements for firms that accept deposits.2

2 2 2 2
COMP 1.1.9 G

[deleted]5

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COMP 1.1.9A G

5This sourcebook is one of the means by which the FCA will meet its statutory objectives of securing an appropriate degree of protection for consumers and protecting and enhancing the integrity of the UK financial system.

COMP 1.1.9B G

[deleted]

COMP 1.1.10 G

[deleted]5

5
COMP 1.1.10A G

5By making rules that allow the FSCS to provide compensation at a level appropriate for the protection of retail consumers and small businesses, the FCA 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 dealing4, or a successor, 4be unable to satisfy claims against it.

COMP 1.1.10B G

[deleted]

COMP 1.2 The FSCS

COMP 1.2.1 G

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.).

COMP 1.2.2 G
  1. (1)

    [deleted]1

    1
  2. (2)

    [deleted]1

    1
COMP 1.2.2A G
  1. (1)

    1In 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. (2)

    Of specific relevance to the way in which the FSCS fulfils its responsibilities is the relationship between the FSCS and the FCA. This is covered in a Memorandum of Understanding which can be found on the FCA website http://www.fca.org.uk.

COMP 1.2.2B G

[deleted]

COMP 1.3 Claimants

COMP 1.3.1 G

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 Financial Services Compensation Scheme, 10th Floor, Beaufort House, 15 St Botolph Street, London EC3A 7QU7, or by telephone or fax (Tel: 0800 678 1100 or Fax: 020 7741 4100)7.

COMP 1.3.2 G

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

COMP 1.3.3 G

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

This Table belongs to COMP 1.1.3 G4.

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Q1

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

A1

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 1 3

(3)

you must be claiming against a relevant person6or a successor6;

COMP 6.2.1 R

(4)

where the claim is against a relevant person, 6the relevant person must be default6; or where the claim is against a successor, the successor must be in default6.

COMP 6.3 6; COMP 6.3A6

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 2

Q2

How much compensation will I be offered?

A2 1

This depends on whether your protected claim is:

(1)

[deleted] 6

5

6

(2)

[deleted] 6

6

(3)

a claim in connection with protected investment business; or1

COMP 5.5

(4)13

a claim in connection with protected home finance mediation;4 or13

4

COMP 5.6 1

(5)3

a claim in connection with protected non-investment insurance mediation.3

COMP 5.7 3

Different limits apply to different types of claim.

COMP 10.2.3 R 2

Q3

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

A3

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

4

(1)

[deleted] 6

5 5

6

(2)

[deleted] 6

5 3

6

(3)

a claim in connection with protected investment business; or3

COMP 12.2.1 R , COMP 12.3.5 R and COMP 12.4.2 R

(4)13

a claim in connection with protected home finance mediation; or5413

4

COMP 12.4.17 R 1

(5)3

a claim in connection with protected non-investment insurance mediation.3

COMP 12.4.20 R 3

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

COMP 12.4.5 R

Q4

[deleted] 6

6

6

6

6

6

6

6

6

6

6

6

2

COMP 1.4 EEA Firms

COMP 1.4.1 G

Incoming EEA firms which are conducting regulated activities in the United Kingdom under a CRD4, IMD or5MiFID3 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'sHome 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 14.221

4 5 3 5
COMP 1.4.2 G

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.

COMP 1.4.3 G

The Deposit Guarantee Directive3and Investor Compensation Directive/s3 require the FSCS to make arrangements with the relevant Home State compensation scheme regarding the payment of compensation (COMP 14.3.1R).

3 3
COMP 1.4.4 G

6 Incoming EEA firms which are passporting into the UK under the UCITS Directive or AIFMD passport, to manage a UCITS scheme or authorised AIF, are required to participate in the compensation scheme.

COMP 1.4.5 G

6 Incoming EEA firms which are passporting into the UK under an AIFMD passport, to manage an unauthorised AIF or to provide the services in article 6(4) of AIFMD, are not required to participate in the compensation scheme for those activities, but may choose to ‘top-up’ into the compensation scheme if they carry on those activities from a branch in the UK and there is no cover provided by the incoming EEA firm'sHome State compensation scheme, or if the level or scope of the cover is less than provided by the compensation scheme.

COMP 1.5 Application to Lloyd's

Compensation arrangements for individual members

COMP 1.5.7 G

1The compensation scheme will not compensate members or former members if firms are unable to satisfy claims made in connection with regulated activities relating to their participation in Lloyd's syndicates. Separate rules and guidance are therefore needed.

COMP 1.5.8 R

1The Society must maintain byelaws establishing appropriate and effective arrangements to compensate individual members and former members who were individual members if underwriting agents are unable, or likely to be unable, to satisfy claims by those members relating to regulated activities carried on in connection with their participation in Lloyd's syndicates.

COMP 1.5.9 R

1For the purposes of COMP 1.5.8 R "individual member" includes a member which is a limited liability partnership or a body corporate whose members consist only of, or of the nominees for, a single natural person or a group of connected persons.

COMP 1.5.10 G

1The arrangements referred to in COMP 1.5.8 R:

  1. (1)

    will not compensate losses arising only as a result of underwriting or investment risk to which individual members or former members who were individual members are or were exposed by their participation in Lloyd's syndicates;

  2. (2)

    may be restricted to compensation for losses arising out of fraud, dishonesty or failure to account; and

  3. (3)

    should cover all regulated activities carried on by underwriting agents relating to Lloyd's syndicate capacity and syndicate membership.

COMP 1.5.11 G

1The arrangements referred to in COMP 1.5.8 R should have a governance structure that is operationally independent from the Society, but which is nevertheless accountable to the Society for the proper administration of the compensation arrangements.

COMP 1.5.12 R

1A contravention of COMP 1.5.8 R does not give rise to a right of action by a private person under section 138D of the Act (Actions for damages) and that rule is specified under Section 138D(3) of the Act as a provision giving rise to no such right of action.

COMP 1.6 Cooperation with the FSCS

COMP 1.6.1 R

1A firm must deal with the FSCS in an open, cooperative and timely way.