You are here: Parliament home page > Parliamentary business > Bills and legislation > Bills before Parliament > Commons Bill
Financial Services and Markets Bill - continued        House of Commons
back to previous text
 
  PART XIV
  THE FINANCIAL SERVICES AND MARKETS COMPENSATION SCHEME
 
The scheme manager
The scheme manager.     183. - (1) The Authority must establish a body corporate ("the scheme manager") to exercise the functions conferred on the scheme manager by or under this Part.
 
      (2) The Authority must take such steps as are necessary to ensure that the scheme manager is, at all times, capable of exercising those functions.
 
      (3) The constitution of the scheme manager must provide for it to have-
 
 
    (a) a chairman; and
 
    (b) a board (which must include the chairman) whose members are the scheme manager's directors.
      (4) The chairman and other members of the board must be persons appointed, and liable to removal from office, by the Authority (acting, in the case of the chairman, with the approval of the Treasury).
 
      (5) But the terms of their appointment (and in particular those governing removal from office) must be such as to secure their independence from the Authority in the operation of the compensation scheme.
 
      (6) The scheme manager is not to be regarded as exercising functions on behalf of the Crown.
 
      (7) The scheme manager's board members, officers and staff are not to be regarded as Crown servants.
 
 
The scheme
The compensation scheme.     184. - (1) The Authority must by rules establish a scheme for compensating persons in cases where relevant persons are unable, or are likely to be unable, to satisfy claims against them.
 
      (2) The rules are to be known as the Financial Services and Markets Compensation Scheme (but are referred to in this Act as "the compensation scheme").
 
      (3) The compensation scheme must, in particular, provide for the scheme manager-
 
 
    (a) to assess and pay compensation, in accordance with the scheme, to claimants in respect of claims made in connection with regulated activities carried on (whether or not with permission) by relevant persons; and
 
    (b) to have power to impose levies on authorised persons, or any class of authorised person, for the purpose of meeting its expenses (including in particular expenses incurred, or expected to be incurred, in paying compensation, borrowing or insuring risks).
      (4) In making any provision of the scheme by virtue of subsection (3)(b), the Authority must take account of the desirability of ensuring that the amount of the levies imposed on a particular class of authorised person reflects, so far as practicable, the amount of the claims made, or likely to be made, in respect of that class of person.
 
      (5) An amount payable to the scheme manager as a result of any provision of the scheme made by virtue of subsection (3)(b) may be recovered as a debt due to the scheme manager.
 
      (6) Sections 185 to 188 make further provision about the scheme but are not to be taken as limiting the power conferred on the Authority by subsection (1).
 
      (7) In those sections "specified" means specified in the scheme.
 
      (8) In this Part "relevant person" means a person who was-
 
 
    (a) an authorised person at the time the act or omission giving rise to the claim took place; or
 
    (b) an appointed representative at that time.
      (9) But a person who qualified for authorisation under Schedule 3 at that time is not to be regarded as a relevant person in relation to any activities for which he had permission as a result of any provision of, or made under, that Schedule unless he was a member of the scheme in relation to those activities at that time.
 
 
Provisions of the scheme
General.     185. - (1) The compensation scheme may, in particular, make provision-
 
 
    (a) as to the circumstances in which a relevant person is to be taken (for the purposes of the scheme) to be unable, or likely to be unable, to satisfy claims made against him;
 
    (b) for the establishment of different funds for meeting different kinds of claim;
 
    (c) for the imposition of different levies in different cases;
 
    (d) limiting the levy payable by a person in respect of a specified period;
 
    (e) for repayment of the whole or part of a levy in specified circumstances;
 
    (f) for a claim to be entertained only if it is made by a specified kind of claimant;
 
    (g) for a claim to be entertained only if it falls within a specified kind of claim;
 
    (h) as to the procedure to be followed in making a claim;
 
    (i) for the making of interim payments before a claim is finally determined;
 
    (j) limiting the amount payable on a claim to a specified maximum amount or a maximum amount calculated in a specified manner;
 
    (k) for payment to be made, in specified circumstances, to a person other than the claimant.
      (2) Different provision may be made with respect to different kinds of claim.
 
      (3) The scheme may provide for the determination and regulation of matters relating to the scheme by the scheme manager.
 
      (4) The scheme, or particular provisions of the scheme, may be made so as to apply only in relation to-
 
 
    (a) activities carried on,
 
    (b) claimants,
 
    (c) matters arising, or
 
    (d) events occurring,

in specified territories, areas or localities.
      (5) The scheme may provide for a person who qualifies for authorisation under Schedule 3 to elect to become a member of the scheme in relation to some or all of the activities for which he has permission as a result of any provision of, or made under, that Schedule.
 
      (6) The scheme may provide for the scheme manager to have power-
 
 
    (a) in specified circumstances,
 
    (b) but only if the scheme manager is satisfied that the claimant is entitled to receive a payment in respect of his claim-
 
      (i) under a scheme which is comparable to the compensation scheme, or
 
      (ii) as the result of a guarantee given by a government or other authority,

to make a full payment of compensation to the claimant and recover the whole or part of the amount of that payment from the other scheme or under that guarantee.
Rights of the scheme in relevant person's insolvency.     186. - (1) The compensation scheme may, in particular, make provision-
 
 
    (a) for treating compensation payable under it in respect of a claim against a relevant person as extinguishing or reducing the liability of that person in respect of the claim; and
 
    (b) for conferring on the scheme manager a right of recovery against that person, in the event of his insolvency, which does not exceed such right (if any) as the claimant would have had in that event.
      (2) The scheme may include provision for the scheme manager to have powers, in relation to the winding-up, bankruptcy or sequestration of a relevant person, the same as, or similar to, those of the Authority mentioned in sections 321(2) to (4) and 324(2) to (4).
 
      (3) Rules may be made under the insolvency provisions for the purpose of integrating any procedure for which provision is made as a result of subsection (1) into the general procedure on a winding-up, bankruptcy or sequestration.
 
      (4) "The insolvency provisions" are-
 
 
    (a) for England and Wales, sections 411 and 412 of the 1986 Act;
 
    (b) for Scotland, section 411 of the 1986 Act; and
 
    (c) for Northern Ireland, Article 359 of the 1989 Order and section 65 of the Judicature (Northern Ireland) Act 1978.
      (5) "The 1985 Act", "the 1986 Act" and "the 1989 Order" have the same meaning as in Part XXII.
 
Continuity of long-term insurance policies.     187. - (1) The compensation scheme may, in particular, include provision requiring the scheme manager to make arrangements for securing continuity of insurance for policyholders, or policyholders of a specified class, of relevant long-term insurers.
 
      (2) "Relevant long-term insurers" means relevant persons who-
 
 
    (a) carry on long-term insurance business; and
 
    (b) are unable, or likely to be unable, to satisfy claims made against them.
      (3) The scheme may provide for the scheme manager to take such measures as appear to him to be appropriate-
 
 
    (a) for securing or facilitating the transfer of the long-term business of a relevant long-term insurer, or any part of it, to another authorised person;
 
    (b) for securing the issue by another authorised person to the policyholders concerned of policies in substitution for their existing policies.
      (4) The scheme may also provide for the scheme manager to make payments to the policyholders concerned-
 
 
    (a) during any period while he is seeking to make arrangements mentioned in subsection (1);
 
    (b) if it appears to him that it is not reasonably practicable to make such arrangements.
      (5) A provision of the scheme made by virtue of section 184(3)(b) may include power to impose levies for the purpose of meeting expenses of the scheme manager incurred in-
 
 
    (a) taking measures as a result of any provision of the scheme made by virtue of subsection (3);
 
    (b) making payments as a result of any such provision made by virtue of subsection (4).
 
previous section contents continue
 
House of Commons home page Houses of Parliament home page House of Lords home page search page enquiries
© Parliamentary copyright 1999
Prepared 18 November 1999