Sundry Points

March 2003

80.39 Financial Services and Markets Tribunal

The Financial Services and Markets Tribunal determines disputes between the regulator, i.e. the FSA, and the regulated. It is operated under rules prepared by the Lord Chancellor’s Department and is staffed and operated independently of the FSA. Individual members of the Tribunal are selected from legally qualified and lay people appointed by the Lord Chancellor. The following may refer their position to the Tribunal:

  • A person who receives a decision notice (see paragraph 80.20) from the FSA.

  • A person who is aggrieved by the FSA’s decision on an application for permission to carry on a regulated activity.

  • A person against whom a decision to make a prohibition order is made.

  • A person against whom the FSA refuses an application for approval.

  • A person carrying out a regulated activity, against whom the FSA has decided to take disciplinary action.

  • If the FSA decide to take action against a person who has engaged in market abuse the matter may be referred to the Tribunal.

The Tribunal will investigate and report on the cases referred to it and the FSA is required to implement its decisions. The Financial Services and Markets Tribunal may by summons require any person, including the official receiver, to attend at such time and place as is specified in the summons, to give evidence or to produce a document in his custody or under his control which the Tribunal considers it necessary to examine. The official receiver should comply with the request made by the Tribunal. If the Tribunal wishes to examine documents in the official receiver’s file, a request should be made to the Tribunal for the documents to be specified, e.g. a copy of any statement of affairs lodged. If the official receiver is concerned with regards to any information requested, the advice of Technical Section should be sought.

Notes: [s132 and Schedule 13] [s55] [s57] [s62] [s67] [127]

80.40 Financial Services Compensation Scheme - general

The Act requires the FSA to set up a compensation scheme. The Financial Services Compensation Scheme is a financial safety net for customers of authorised financial services firms.

The FSCS pays compensation if an authorised firm is unable to pay claims against it, usually because it has gone out of business or when a firm is insolvent. The Scheme is funded by the industry and covers deposits, insurance and investments. There are maximum levels of compensation payable and the Scheme may not cover the entire loss. The Scheme was set up mainly to protect private customers of authorised firms but also covers small businesses. There is no cost involved in making a compensation claim.

Where an authorised firm is unable, or likely to be unable, to meet the claims against it, the FSCS will declare it ‘in default’. Only after a declaration of default is made will the FSCS consider claims for compensation. In return for the payment of compensation by the FSCS, the claimant must assign his/her rights in respect of the authorised firm’s liabilities to him/her to the FSCS. The official receiver should note that the FSCS Rules contain their own subrogation provisions which allow the FSCS to stand in the shoes of a compensated claimant as a creditor in the insolvency proceedings. When dealing with insolvency proceedings in which the FSCS may have some involvement, the official receiver should give early notice of the winding-up order or bankruptcy order to the FSCS.

Notes: [FSA Handbook, Compensation Rules, Comp 7, assignment of rights, 7.1 and 7.2]

80.41 Disclosure of information to the FSCS

The FSCS may seek information from the official receiver when agreeing claimants’ claims. Under section 224 the FSCS’s scheme manager has the power to inspect documents held by the official receiver. When the official receiver receives a request from the scheme manager to inspect documents belonging to the insolvent, he/she should make them available to the FSCS as soon as possible.

Notes: [s224]

80.42 Claims in insolvency proceedings 

Certain provisions of the Act enable the court to recover profits accrued to an authorised person as a consequence of specific infringements of the Act. The court may order the person concerned to pay to the FSA such sum as appears to be just. The amount paid to the FSA must be paid or distributed by the FSA to the person to whom the profits are attributable or to the person who has suffered the loss.

The FSA also has the power to require the person concerned to pay to the appropriate person or distribute among the appropriate persons such amount as appears to the FSA to be just.

In the case of an insolvent company, partnership or individual, any such profits will comprise assets for the benefit of the estate. Where a potential claim exists in respect of these provisions, the official receiver should consider the appointment of an insolvency practitioner experienced in financial services businesses to deal with these claims.

Notes: [s382 and s383] [s384]

80.43 Auditors 

Under the Act the FSA can require an authorised person to appoint an auditor (if it is not already under an obligation to do so imposed by other statutes such as the Companies Act). An auditor appointed under section 340 does not contravene any duty to which he is subject purely because he gives information to the FSA on a matter of which he has become aware, if he acts in good faith.

Notes:[s340] [s342]

80.44 Record of authorised persons 

The FSA maintains a record of every:

  • Person who appears to the FSA to be an authorised person.

  • Authorised unit trust scheme.

  • Authorised open-ended investment company.

  • Recognised scheme.

  • Recognised investment exchange.

  • Recognised clearing house.

  • Individual to whom a prohibition order relates.

  • Approved person.

  • Person falling within such other class as the FSA may determine.

The record of authorised persons includes information as to the services the authorised person provides and the address where documents may be served. These records are available for inspection by the public.

Notes: [s347]

80.45 Lloyd’s and the FSA

Lloyd’s is a society incorporated by the Lloyd’s Act 1871. The Corporation of Lloyd’s operates the market, employs staff and handles members’ deposits. The Council of Lloyd’s has overall responsibility to regulate and direct the membership of Lloyd’s and the insurance and reinsurance business transacted at Lloyd’s.

The Act made Lloyd’s subject to the authority of the FSA. The FSA’s general duty is to keep itself informed of the way in which the Council of Lloyd’s exercises its regulatory and supervisory powers over the Lloyd’s market and the way in which regulated activities are carried on. The FSA’s main concern regarding Lloyd’s is to protect policyholders against the risk that valid claims may not be paid. The Act allows the Council of Lloyd’s, so long as it does so to the FSA’s satisfaction, to continue with the day-to-day regulation of the society and the insurance operations conducted at Lloyd’s. The FSA has the power to intervene at Lloyd’s if necessary.

Notes: [s314]

80.46 Fee income used to finance FSA 

The FSA can make rules providing for the payment of such fees in connection with discharging any of its functions under or as a result of the Act, as it considers will enable it;

  • to meet the expenses incurred in carrying out its functions or for any incidental purpose;

  • to repay the principal of, and pay any interest on, any money which it has borrowed; and

  • to maintain adequate reserves.

Any fee which is owed to the FSA under any provision made by or under the Act may be recovered as a debt due to the FSA.

Notes: [Schedule 1 Part III]

80.47 Designated professional bodies 

The designated professional bodies are required to have in place internal rules relating to the carrying on by their members of regulated activities. The designated professional bodies are:

  • The Law Society.

  • The Law Society of Scotland.

  • The Law Society of Northern Ireland.

  • The Institute of Chartered Accountants in England and Wales.

  • The Institute of Chartered Accountants of Scotland.

  • The Institute of Chartered Accountants in Ireland.

  • The Association of Chartered Certified Accountants.

  • The Institute of Actuaries.

Notes: [The Financial Services and Markets Act 2000 (Designated Professional Bodies) Order 2001 (Statutory Instrument 2001/12260)]

80.48 Future responsibilities for the FSA

The FSA will in the future be responsible for regulating mortgage advice. The FSA are in the process of reviewing this matter.
The FSA will also be regulating the sale of general insurance policies, e.g. house and car policies. This follows from action in the EU on the Insurance Mediation Directive. The directive requires statutory regulation of general insurance brokers. HM Treasury will have to bring forward legislation to enact this directive. The FSA will then consult widely to provide a new regime that provides appropriate protection for consumers.
The proposed date for implementing the above new regimes is currently early 2004.


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