COMP 14.1 Application and Purpose

This chapter provides supplementary rules and guidance for an incoming EEA firm which is a credit institution, an IMD insurance intermediary, an MiFID investment firm4 or UCITS management company. It reflects in part3 the implementation of the Deposit Guarantee Directive, Investors Compensation Directive, and UCITS Directive. This sourcebook applies in the usual way to an incoming EEA firm which is exercising EEA rights under the Insurance Directives. Such a firm is not affected by the Deposit Guarantee Directive, the Investors Compensation Directive or the UCITS Directive.2

1. (1)

   6An incoming EEA firm, which is a credit institution, an IMD insurance intermediary or an MiFID investment firm is not a participant firm in relation to its passported activities unless it "tops-up" into the compensation scheme. This reflects section 213(10) of the Act (The compensation scheme) and regulation 2 of the Electing Participants Regulations (Persons not to be regarded as relevant persons). If an incoming EEA firm also carries on non-passported activities for which the compensation scheme provides cover, it will be a participant firm in relation to those activities and will be covered by the compensation scheme for those activities in the usual way.

2. (2)

   6Whether an incoming EEA firm which is an EEA UCITS management company is a participant firm in relation to its passported activities depends on the nature of its activities. In so far as it carries on the activities of managing investments (other than collective portfolio management), advising on investments or safeguarding and administering investments, it is not a participant firm unless it "tops-up" into the compensation scheme. To the extent that such a firm provides collective portfolio management services for a UCITS scheme from a branch in the United Kingdom or under the freedom to provide cross border services, it is a participant firm in respect of those services.

In relation to an incoming EEA firm's passported activities, its Home State compensation scheme must provide compensation cover in respect of business within the scope of the Deposit Guarantee Directive, Investors Compensation Directive and article 6(3)6of the UCITS Directive, whether that business is carried on from a UK branch or on a cross border services basis. (For an EEA UCITS management company,6 this is only for certain passported activities, namely managing investments (other than collective portfolio management), advising on investments or safeguarding and administering investments.) Insurance mediation activity relating to non-investment insurance contracts is not within the scope of the Deposit Guarantee Directive and the Investor Compensation Directive.21

If there is no cover provided by the incoming EEA firm's Home State or the scope and/or 5level of cover is less than that provided by the compensation scheme, this chapter enables the firm to obtain cover or 'top-up' cover from the compensation scheme for its passported activities carried on from a UK branch, up to the compensation scheme's limits (set out in COMP 10). This reflects section 214(5) of the Act (General) and regulation 3 of the Electing Participants Regulations (Persons who may elect to participate). If the firm 'tops up' and then becomes insolvent, the Home State compensation scheme will pay compensation 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 12.4.1 R and COMP 12.4.4 R).2