Section 213: The compensation scheme., Financial Services and Markets Act 2000

The regulators must by rules made in accordance with an order under subsection (1A) establish a scheme for compensating persons in cases where—

relevant persons are unable, or likely to be unable, to satisfy claims against them, ...

relevant exchanges are unable, or likely to be unable, to satisfy claims made against them in connection with a regulated activity relating to a trading facility carried on by the exchange, or

persons who have assumed responsibility for liabilities arising from acts or omissions of relevant persons or relevant exchanges ("successors") are unable, or likely to be unable, to satisfy claims against the successors that are based on those acts or omissions.

The Treasury must by order specify—

the cases in which the FCA may, or may not, make rules under subsection (1), and

the cases in which the PRA may, or may not, make rules under that subsection.

The rules (taken together) are to be known as the Financial Services Compensation Scheme (but are referred to in this Act as "the compensation scheme").

The compensation scheme must, in particular, provide for the scheme manager—

to assess and pay compensation, in accordance with the scheme, to claimants in respect of claims made in connection with—

a regulated activity carried on (whether or not with permission) by relevant persons; and

a regulated activity relating to a trading facility carried on (whether or not in accordance with any requirements relating to that activity resulting from section 286) by relevant exchanges; and

to have power to impose levies for the purpose of meeting its expenses (including in particular expenses incurred, or expected to be incurred, in paying compensation, borrowing or insuring risks)—

on authorised persons, or any class of authorised person;

on recognised investment exchanges carrying on a regulated activity relating to a trading facility, or any class of such exchanges; or

on authorised persons and on recognised investment exchanges carrying on a regulated activity relating to a trading facility, or on any class of such persons and exchanges.

The compensation scheme may provide for the scheme manager to have power to impose levies—

on authorised persons, or any class of authorised person;

on recognised investment exchanges carrying on a regulated activity relating to a trading facility, or any class of such exchanges; or

on authorised persons and on recognised investment exchanges carrying on a regulated activity relating to a trading facility, or on any class of such persons and exchanges,

for the purpose of recovering the cost (whenever incurred) of establishing the scheme.

In making any provision of the scheme by virtue of subsection (3)(b), the regulators must take account of the desirability of ensuring that the amount of the levies imposed on a particular —

class of authorised person;

class of recognised investment exchange carrying on a regulated activity relating to a trading facility; or

class of authorised person and of recognised investment exchanges carrying on a regulated activity relating to a trading facility;

reflects, so far as is practicable, the amount of claims or recapitalisation payments within the meaning of section 214E, as the case may be, made, or likely to be made in respect of that class of person, exchange, or persons and exchanges.

The compensation scheme may not allow the scheme manager to impose levies on credit unions in relation to recapitalisation payments under section 214E.

In subsection (5A), the reference to "credit unions" is to credit unions within the meaning of—

the Credit Unions Act 1979 (see section 31);

the Credit Unions (Northern Ireland) Order 1985 (S.I. 1985/1205 (N.I. 12)) (see Article 2).

An amount payable to the scheme manager as a result of any provision of the scheme made by virtue of subsection (3)(b) or (4) may be recovered as a debt due to the scheme manager.

Sections 214 to 217 make further provision about the scheme but are not to be taken as limiting the power conferred on the regulators by subsection (1).

In those sections "specified" means specified in the scheme.

In this Part (except in sections 219, 220 or 224) "relevant person" means a person who was—

an authorised person at the time the act or omission giving rise to the claim against him , or against a successor falling within subsection (1)(b), took place; or

an appointed representative at that time.

But a person is not to be regarded as a relevant person in relation to a regulated activity if, at that time, the person—

was a Gibraltar-based person with a Schedule 2A permission to carry on the activity, and

fell within a prescribed category, either generally or in relation to the activity.

Regulations prescribing a category of person for the purposes of subsection (10A) may, among other things, make provision by reference to—

whether the activity is carried on through a branch in the United Kingdom;

the level of protection provided by the compensation scheme and by any comparable scheme operating in Gibraltar.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

In this Part (except in sections 220 and 224) "relevant exchange" means a body corporate or unincorporated association which was a recognised investment exchange carrying on a regulated activity relating to a trading facility at the time the act or omission giving rise to the claim against it, or against a successor falling within subsection (1)(b), took place.

In this Part "regulated activity relating to a trading facility" means—

the regulated activity of operating a multilateral trading facility; or

the regulated activity of operating an organised trading facility.

In this Part, "funeral plan contract" has the same meaning as in article 59(2) of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001.

Section 213: The compensation scheme.

Discussed in

About this text