C1Part IV Protection of Investors
Investor Protection Scheme
C227 Payments to investors.
F11
Subject to the following provisions of this section, if at any time a participating institution becomes insolvent, the Board—
a
shall as soon as practicable pay out of the Fund to persons who have at that time protected investments in the institution which are due and payable amounts equal ot 90 per cent of their protected investments; and
b
shall in any event secure that, before the end of the relevant period, it is in a position to make those payments as soon as they fall to be made.
2
If at any time a participating institution ceases to be insolvent, subsection (1) above shall cease to apply in relation to that institution.
2A
In subsection (1) above “the relevant period” means—
a
the period of three months beginning with the time when the institution becomes insolvent; or
b
that period and such additional period or periods, being not more than three and of not more than three months each, as the Commission may in exceptional circumstances allow.
3
A person claiming to be entitled to a payment under this section in respect of his protected investment in an F2insolvent participating institution shall make his claim in such form, with such evidence proving it, and within such period, as the Board directs and either to the Board or to F3such institution (whether the Bank of England, an authorised institution or a building society) authorised by the Board to make the payments on its behalf, as the Board directs.
F43A
The amount of any payment which falls to be made under subsection (1) above in respect of a protected investment made with an office of a building society in another EEA State shall not exceed such amount as the Board may determine is or would be payable, in respect of an equivalent investment or deposit made with an institution authorised in that State, under any corresponding scheme for the protection of investors or depositors which is in force in that State.
3B
Where the Board is satisfied that an investor has received or is entitled to receive, under any home State scheme, a payment in respect of a protected investment made with a United Kingdom office of a participating EEA institution, the Board shall deduct an amount equal to that payment from the payment that would otherwise be made to the investor under subsection (1) above.
F54
The Board may decline to make any payment under subsection (1) to a person who, in the opinion of the Board–
a
had any responsibility for, or may have profited directly or indirectly from, the circumstances giving rise to the institution’s financial difficulties; or
b
is entitled to receive a payment in respect of his protected investment under a scheme established under section 54 of the Financial Services Act 1986 or set up pursuant to the conditions and arrangements referred to in section 43(2) of that Act,
and where any payment as mentioned in paragraph (b) above has been received by a person, the Board shall decline to make a payment under subsection (1) to that person.
F64A
There shall be deducted from any payment to be made by the Board under subsection (1) above in respect of a protected investment any payment already made in respect of that investment by a liquidator F7or administratorof the institution; and in this subsection, in relation to an institution formed under the law of a country or territory outside the United Kingdom, the reference to a liquidator F7or administratorincludes a reference to a person whose functions appear to the Board to correspond as nearly as may be to those of a liquidator F7or administrator.
5
For the purposes of this section in its application in relation to a participating institution which has become insolvent—
a
a person has at any time a protected investment in the institution if he has a deposit with the institution in an EEA currency or, in the case of a building society or Irish building society, a share in the society; and
b
his protected investment is the total liability of the institution to him, limited to the maximum mentioned in subsection (5A) below, which is referable to sums deposited with the institution or, in the case of a building society or Irish building society, to shares in the society.
5A
The maximum is £20,000 or the sterling equivalent of 22,222 ecus immediately before the institution became insolvent, whichever is the greater.
5B
In calculating a person’s protected investment for the purposes of subsection (5) above, the amount to be taken into account as regards any desposit made in another EEA currency shall be its sterling equivalent immediately before the time when the institution became insolvent, or the time when the investment became due and payable, whichever is the later.
5C
In its application to a participating EEA institutions, subsection (5) above shall have effect as if any reference to a deposit with, or sums deposited with, the institution were a reference to a deposit with or sums deposited with, a United Kingdom office of the institution.
6
The Treasury, after consultation with the Board, may by order made by statutory instrument—
a
F9b
amend subsection (5A) above so as to substitute for either sum for the time being specified in that subsection such greater sum as may be specified in the order.
7
No order shall be made under subsection (6) above unless a draft of it has been laid before, and approved by a resolution of, each House of Parliament.
F108
In determining whether a person has a protected investment in a participating institution and the amount of it there shall be disregarded—
a
any deposit or shares which are own funds within the meaning given by Article 2 of Directive 89/299/EECM1;
b
any deposit made or share acquired by a credit institution on its own behalf and for its own account;
c
any deposit or share which the Board is satisfied was made or acquired in the course of a money-laundering transaction;
d
e
any deposit, security or liability which falls within item 10 or 12 of that Annex; and
f
in the case of an institution which has ceased to be a European authorised institution which, in accordance with Chapter I of Part II of the 1995 Regulations, is participating in the scheme established by the protective scheme provisions, any deposit made with the institutions after it ceased to be a such an institution.
8A
Paragraph (b) of subsection (8) above has effect subject to the provisions of Schedule 6 to this Act; and a transaction in connection with which an offence has been committed under—
a
any enactment specified in a regulation 2(3) of the Money Laundering Regulations 1993 M3 ; or
b
any enactment in force in another EEA State, or in a country or territoty outside the European Economic Area, which has effect for the purpose of prohibiting money laundering within the meaning of Article 1 of Directive 91/308/EECM4,
is a money-laundering transaction for the purposes of paragraph (c) of that subsection at any time if, at that time, a person stands convicted of the offence or has been charged with the offence and has not been tried.
9
In determining what is a protected investment of an investor, no account shall be taken of any liability unless—
a
proof of the debt, or a claim for repayment of the investment, which gives rise to the liability has been lodged with a liquidator F11or administratorof the institution; or
b
the investor has provided the Board with all such written authorities, information and documents as, in the event of a liquidator F11or administratorbeing appointed, the Board will need for the purpose of lodging and pursuing, on the investor’s behalf, a proof of the debt, or a claim for the repayment of the investment, which gives rise to the liability.
9A
In subsection (9) above, in relation to an institution incorporated in or formed under the law of an EEA State other than the United Kingdom—
a
b
references to the lodging, or the lodging and pursuing, of a proof of the debt, or a claim for the repayment of the deposit, which gives rise to the liability include references to the doing of an act or acts which appear to the Board to correspond as nearly as may be to the lodging. or the lodging and pursuing, of such a proof or claim,
10
Unless the Board otherwise directs in any particular case or class of case, in determining the total liability of an insolvent F13participating institution to any person for the purposes of subsection (1) above, there shall be deducted the amount of any liability of that person to F14the institution—
a
in respect of which a right of set-off existed immediately before F14the institution became insolvent against any such investment of his as is referred to in that subsection, or
b
in respect of which such a right would then have existed if the investment in question had been repayable on demand and the liability in question had fallen due.
11
Payments under this section in respect of a protected investment in an insolvent F15participating institution may, if the Board thinks fit, be made by such instalments as it determines for the purposes of that insolvency.
12
Schedule 6 to this Act, which contains provisions about investments held by trustees or jointly or on client’s account, shall have effect.
Pt. IV (ss. 24-33) modified (1.7.1995) (temp. until 31.12.1999) by S.I. 1995/1442, reg. 54(2)