This chapter applies to the FSCS.

This chapter also applies to an incoming EEA firm which is a10MiFID investment firm4, an IDD insurance intermediary11,7 a UCITS management company, an MCD mortgage credit intermediary9 or an AIFM7.21

7For an incoming EEA firm which is an AIFM, the question of whether it is a participant firm for its passported activities depends on the type of activities it carries on under that passport. If it manages an authorised AIF from a branch in the UK or under the freedom to provide cross-border services, it is a participant firm for that activity. If it manages an unauthorised AIF, or provides the services in article 6(4) of AIFMD from a branch in the UK or on a cross-border services basis, it is not a participant firm for that activity; however, it may choose to obtain top-up cover for those activities if carried on from a branch in the UK.

An incoming EEA firm may, by notice in writing to the FSCS, elect to receive top-up cover from the compensation scheme if it falls within one of the categories prescribed in regulation 3 of the Electing Participants Regulations (Persons who may elect to participate).

An election under COMP 14.2.1 R takes effect on the date when the FSCS notifies the incoming EEA firm that its election has been accepted.

When the FSCS accepts an application, it must allocate the incoming EEAfirm to the contribution group (or groups) which seems to the FSCS to be most appropriate, taking into account the nature of the business for which the incoming EEA firm is seeking cover from the compensation scheme.

The FSCS must put in place and publish procedures to enable an appeal by an incoming EEA firm against a rejection by the FSCS of an election to receive top-up cover or a decision to allocate an incoming EEA firm, once the firm's election has been accepted, to a particular contribution group. Such procedures must satisfy the minimum requirements of procedural fairness and comply with the European Convention on Human Rights.

Where an incoming EEA firm obtains top-up cover under COMP 14.2, the FSCS must co-operate with that firm'sHome State compensation scheme. In particular, the FSCS must2 seek to establish with that firm's Home State compensation scheme appropriate procedures for the payment of compensation to claimants, following the principles set out in3 Annex II of the Investor Compensation Directive3.

The FSCS must terminate an incoming EEA firm'stop-up cover where it has ascertained2 that the conditions in COMP 14.2.1 R are no longer satisfied.

If an incoming EEA firm which has top-up cover fails to observe any of the rules in this sourcebook which apply to participant firms, the FSCS must notify the FCA3 and the incoming EEA firm'sHome State regulator.

In cases where COMP 14.4.2 R applies, the FSCS must co-operate with the incoming EEA firm'sHome State regulator so that appropriate measures can be taken to ensure that the incoming EEA firm meets its obligations under this sourcebook.

4If the incoming EEA firm fails to meet its obligations for a period of twelve months following the notice, the FSCS may, subject to obtaining the consent of the incoming EEA firm'sHome State regulator, terminate its top-up cover. Notwithstanding the termination of top-up cover under this rule, cover will continue for protected investment business transacted before that termination.

An incoming EEA firm which has top-up cover may terminate that top-up cover by giving six months' notice in writing to the FSCS.

When an incoming EEA firm's top-up cover comes to an end under COMP 14.4.1 R, COMP 14.4.4 R or COMP 14.4.5 R, it must:1

1. (1)

   inform all the clients of its UKbranch no later than six weeks after the date that its participation ends that they are no longer protected (or, if appropriate, of the more limited protection provided)2 by the compensation scheme, and of the level of compensation which is then available to them; and1

2. (2)

   within two months, notify the FSCS whether it has done so.1

If an incoming EEA firm fails to comply with COMP 14.4.6R (1)1, the FSCS must inform the firm's Home State regulator of that fact.

The FSCS must bring the ending of an incoming EEA firm's top-up cover to the attention of the incoming EEA firm's clients by means of a public notice.

1Where an EEA UCITS management company 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, the FSCS must allocate the firm to the class or classes2 which seems to the FSCS to be most appropriate, taking into account the nature of the firm's business activities.