Financial Services and Markets Bill

Financial Services and Markets Bill - continued	House of Commons
PART XIV, THE FINANCIAL SERVICES AND MARKETS COMPENSATION SCHEME - continued
Provisions of the scheme - continued

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Insurers in financial difficulties.

188. - (1) The compensation scheme may, in particular, include provision for the scheme manager to have power to take measures for safeguarding policyholders, or policyholders of a specified class, of relevant insurers.

(2) "Relevant insurers" means relevant persons who-

(a) carry on insurance business; and

(b) are in financial difficulties.

(3) The measures may include such measures as the scheme manager considers appropriate for-

(a) securing or facilitating the transfer of the insurance business of a relevant insurer, or any part of it, to another authorised person;

(b) giving assistance to the relevant insurer to enable it to continue insurance business.

(4) The scheme may provide-

(a) for the power to take measures of a kind mentioned in subsection (3)(a) to be on terms, including terms reducing the liabilities or the benefits provided for under any policies, appearing to the scheme manager to be appropriate;

(b) for the power to take measures of a kind mentioned in subsection (3)(b) to be conditional on the reduction of any liabilities or benefits provided for under any policies of the relevant insurer concerned;

(c) for ensuring that measures of a kind mentioned in subsection (3)(b) do not benefit to any material extent persons who were members of a relevant insurer when it began to be in financial difficulties or who had any responsibility for, or who may have profited from, the circumstances giving rise to its financial difficulties, except in specified circumstances;

(d) for requiring the scheme manager to be satisfied that any measures he proposes to take are likely to cost less than it would cost to pay compensation under the scheme if the relevant insurer became unable, or likely to be unable, to satisfy claims made against him.

(5) The scheme may provide for the Authority to have power-

(a) to give such assistance to the scheme manager as it considers appropriate for assisting the scheme manager to determine what measures are practicable or desirable in the case of a particular relevant insurer;

(b) to impose constraints on the taking of measures by the scheme manager in the case of a particular relevant insurer;

(c) to require the scheme manager to provide it with information about any particular measures which the scheme manager is proposing to take.

(6) The scheme may include provision for the scheme manager to have power-

(a) to make interim payments in respect of eligible policyholders of a relevant insurer;

(b) to indemnify any person making payments to eligible policyholders of a relevant insurer.

(7) 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 (1) or (3);

(b) making payments or giving indemnities as a result of any such provision made by virtue of subsection (6).

(8) "Financial difficulties" and "eligible policyholders" have such meanings as may be specified.

Annual report

Annual report.

189. - (1) At least once a year, the scheme manager must make a report to the Authority on the discharge of its functions.

(2) The report must-

(a) include a statement setting out the value of each of the funds established by the compensation scheme; and

(b) comply with any requirements specified in rules made by the Authority.

(3) The scheme manager must publish each report in the way it considers appropriate.

Information and documents

Scheme manager's power to require information.

190. - (1) The scheme manager may, by notice in writing served on the relevant person in respect of whom a claim is made under the scheme or on a person otherwise involved, require that person-

(a) to provide specified information or information of a specified description; or

(b) to produce specified documents or documents of a specified description.

(2) The information or documents must be provided or produced-

(a) before the end of such reasonable period as may be specified; and

(b) in the case of information, in such manner or form as may be specified.

(3) This section applies only to information and documents the provision or production of which the scheme manager considers-

(a) to be necessary for the fair determination of the claim; or

(b) to be necessary (or likely to be necessary) for the fair determination of other claims made (or which it expects may be made) in respect of the relevant person concerned.

(4) If a document is produced in response to a requirement imposed under this section, the scheme manager may-

(a) take copies or extracts from the document; or

(b) require the person producing the document to provide an explanation of the document.

(5) If a person who is required under this section to produce a document fails to do so, the scheme manager may require the person to state, to the best of his knowledge and belief, where the document is.

(6) No person may be required under this section to produce or disclose a privileged communication.

(7) If a person claims a lien on a document, its production under this Part does not affect the lien.

(8) "Specified" means specified in the notice served under subsection (1).

(9) A person is involved in a claim made under the scheme if he was knowingly involved in the act or omission giving rise to the claim.

Scheme manager's power to inspect information held by liquidator etc.

191. - (1) For the purpose of assisting the scheme manager to discharge its functions in relation to a claim made in respect of an insolvent relevant person, the liquidator, administrator or trustee in bankruptcy of that person must permit a person authorised by the scheme manager to inspect relevant documents.

(2) A person inspecting a document under this section may take copies of, or extracts from, the document.

(3) This section does not apply if the liquidator, administrator or trustee in bankruptcy is-

(a) the Official Receiver;

(b) the Official Receiver for Northern Ireland; or

Powers of court where information required.

192. - (1) If a person ("the defaulter")-

(a) fails to comply with a requirement imposed under section 190, or

(b) fails to permit documents to be inspected under section 191,
the scheme manager may certify that fact in writing to the court and the court may enquire into the case.

(2) If the court is satisfied that the defaulter failed without reasonable excuse to comply with the requirement (or to permit the documents to be inspected), it may punish the defaulter (and, in the case of a body corporate, any director or officer) as if he had been guilty of contempt of court.

(3) "Court" means-

(a) the High Court;

(b) in Scotland, the Court of Session.

Miscellaneous

Statutory immunity.

193. - (1) Neither the scheme manager nor any person who is, or is acting as, its board member, officer or member of staff is to be liable in damages for anything done or omitted in the discharge, or purported discharge, of the scheme manager's functions.

(2) Subsection (1) does not apply-

(a) if the act or omission is shown to have been in bad faith; or

(b) so as to prevent an award of damages made in respect of an act or omission on the ground that the act or omission was unlawful as a result of section 6(1) of the Human Rights Act 1998.

Management expenses.

194. - (1) The amount which the scheme manager may recover, from the sums levied under the scheme, as management expenses attributable to a particular period may not exceed such amount as may be fixed by the scheme as the limit applicable to that period.

(2) In calculating the amount of any levy to be imposed by the scheme manager, no amount may be included to reflect management expenses unless the limit mentioned in subsection (1) has been fixed by the scheme.

(3) "Management expenses" means expenses incurred, or expected to be incurred, by the scheme manager in connection with its functions under this Act other than those incurred-

(a) in paying compensation;

(b) as a result of any provision of the scheme made by virtue of section 187(3) or (4) or 188(1), (3) or (6).

Tax treatment of levies and repayments.

195. - (1) In the Income and Corporation Taxes Act 1988 ("the 1988 Act"), after section 76, insert-

"Levies under the Financial Services and Markets Compensation Scheme.	76A. - (1) In computing the amount of the profits to be charged under Case I of Schedule D arising from a trade carried on by an authorised person-
	(a) to the extent that it would not be deductible apart from this section, any sum expended by the authorised person in paying a levy under the Financial Services and Markets Compensation Scheme may be deducted as an allowable expense;
	(b) any payment which is made to the authorised person by the scheme manager as a result of any provision made by virtue of section 185(1)(e) of the Financial Services and Markets Act 2000 is to be treated as a trading receipt.
	(2) In this section "authorised person" and "scheme manager" have the same meaning as in the Financial Services and Markets Act 2000."

(2) In section 75 of the 1988 Act (expenses of management: investment companies), after subsection (5), insert-

	"(5A) For the purposes of this section any sums paid by a company by way of a levy under the Financial Services and Markets Compensation Scheme shall be treated as part of its expenses of management.
	(5B) If the scheme manager makes a payment to a company as a result of any provision made by virtue of section 185(1)(e) of the Financial Services and Markets Act 2000, the company shall be charged to tax under Case VI of Schedule D on the amount of that payment."

(3) In section 76 of the 1988 Act (expenses of management: insurance companies), for subsection (7) substitute-

"(7) For the purposes of this section any sums paid by a company by way of a levy under the Financial Services and Markets Compensation Scheme shall be treated as part of its expenses of management."

Scheme manager's power to inspect documents held by Official Receiver etc.

196. - (1) If, as a result of the insolvency or bankruptcy of a relevant person, any documents have come into the possession of the Official Receiver, he must permit any person authorised by the scheme manager to inspect the documents for the purpose of establishing-

(a) the identity of persons to whom the scheme manager may be liable to make a payment in accordance with the compensation scheme; or

(b) the amount of any payment which the scheme manager may be liable to make.

(2) A person inspecting a document under this section may take copies or extracts from the document.

(3) In this section "relevant person" means a person who was-

(a) an authorised person at the time the act or omission which may give rise to the liability mentioned in subsection (1)(a) took place; or

(b) an appointed representative at that time.

(4) But a person who qualified for authorisation under Schedule 3 at that time is not to be regarded as a relevant person for the purposes of this section 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.

(5) "Official Receiver" includes-

(a) the Official Receiver for Northern Ireland; and

(b) the Accountant in Bankruptcy.

Prepared 18 November 1999