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The Investment Bank Special Administration Regulations 2011

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Citation and commencementU.K.

1.  These Regulations may be cited as the Investment Bank Special Administration Regulations 2011 and shall come into force on the day after the day on which they are made.

InterpretationU.K.

2.—(1) In these Regulations, except where the context otherwise requires—

“the Act” means the Banking Act 2009;

“administrator” has the meaning set out in regulation 4;

“Authorities” means the Bank of England, the Treasury [F1, the FCA and the PRA];

“business day” has the meaning set out in section 251 of the Insolvency Act;

“client” means a person for whom the investment bank has undertaken to receive or hold client assets (whether or not on trust and whether or not that undertaking has been complied with);

[F2“client money account” means an account which the investment bank maintains in accordance with client money rules, including an account with any person which the investment bank maintains for the purpose of—

(a)

any transaction with or by that person for a client’s benefit; or

(b)

meeting a client’s obligation to provide collateral for a transaction;]

[F2“client money” means client assets which are money received or held by an investment bank for, or on behalf of, clients;]

[F2“client money pool” means the pool of client money which is held on trust by the investment bank in accordance with client money rules and has been pooled in accordance with those rules for the purpose of distribution;]

[F2“client money rules” means rules made under Part 9A of FSMA (rules and guidance) which make provision relating to the handling and distribution of money held by a person who is authorised for the purposes of FSMA;]

“contributory” has the meaning set out in section 79 of the Insolvency Act M1;

“court” means—

(a)

in England and Wales, the High Court,

(b)

in Scotland, the Court of Session, and

(c)

in Northern Ireland, the High Court;

“deposit-taking bank” means an investment bank to which the definition set out either in section 2 or in section 91 of the Act applies;

“the Disqualification Act” means the Company Directors Disqualification Act 1986 M2;

F3...

F3...

“enactment” includes—

(a)

an enactment comprised in or in an instrument made under an Act of the Scottish Parliament;

(b)

Acts and Measures of the National Assembly for Wales and instruments made such an Act or Measure;

(c)

Northern Ireland legislation;

and any EU Instrument (as defined in Part 2 of Schedule 1 of the European Communities Act 1972 M3);

“fair” is to be construed in accordance with section 93(8) of the Act;

[F4“FCA” means the Financial Conduct Authority;]

[F5“foreign property” has the meaning given by section 39(2) of the Act;]

[F5“FSCS” means the scheme manager of the Financial Services Compensation Scheme (established under Part 15 of FSMA);

“FSMA” means the Financial Services and Markets Act 2000 M4;

“the Insolvency Act” means the Insolvency Act 1986 M5;

“insolvency rules” means rules made under section 411 of the Insolvency Act as applied and modified by regulation 15;

“market charge” means a charge to which Part 7 of the Companies Act 1989 M6 applies as a result of the operation of section 173 of that Act M7;

“market contract” means a contract to which Part 7 of the Companies Act 1989 applies as a result of the operation of section 155 of that Act M8;

“market infrastructure body” means a recognised clearing house, [F6recognised CSD,] recognised investment exchange [F7 F8..., third country central counterparty], recognised overseas clearing house [F9 F8..., third country CSD] or recognised overseas investment exchange in relation to which the investment bank is a counterparty in a market contract or to a market charge or is a member or participant;

“Objective 1”, “Objective 2” and “Objective 3” have the meanings set out in regulation 10;

[F10“PRA” means the Prudential Regulation Authority;]

[F10“PRA-authorised person” has the meaning given by FSMA;]

“prescribed” means prescribed by insolvency rules;

“recognised clearing house” has the meaning set out in section 285 of FSMA;

[F11“recognised CSD” has the meaning set out in section 285 of FSMA;]

“recognised investment exchange” has the meaning set out in section 285 of FSMA;

“recognised overseas clearing house” means an overseas person in respect of whom [F12a recognition order has been made] under section 292 of FSMA M9 declaring them to be a recognised clearing house;

“recognised overseas investment exchange” means an overseas person in respect of whom [F13a recognition order has been made] under section 292 of FSMA declaring them to be a recognised investment exchange;

[F14“the regulators” means the FCA and the PRA, and references to a regulator are to be read accordingly;]

“Schedule B1” means Schedule B1 to the Insolvency Act M10;

“Schedule B1 administration” means the administration procedure set out in Schedule B1;

“securities” means financial instruments as defined in regulation 3 of the Financial Collateral Arrangements (No.2) Regulations 2003 M11;

“security interest” means any legal or equitable interest or any other right in security (other than a title transfer financial collateral arrangement) created or otherwise arising by way of security including—

(a)

a pledge,

(b)

a mortgage,

(c)

a fixed charge,

(d)

a charge created as a floating charge, or

(e)

a lien;

“special administration” has the meaning set out in regulation 3;

“special administration (bank insolvency)” has the meaning set out in paragraph 1 of Schedule 1;

“special administration (bank administration)” has the meaning set out in paragraph 1 of Schedule 2;

“special administration objectives” has the meaning set out in regulation 10;

“special administration order” has the meaning set out in regulation 4;

“statement of proposals” means the statement of proposals drawn up by the administrator in accordance with—

(a)

paragraph 49 of Schedule B1 (as applied by regulation 15);

(b)

where the [F15FCA or, where relevant, the PRA] has given a direction, regulation 17; or

(c)

in relation to Schedule 2, paragraph 7 of that schedule; and

[F16“third country central counterparty” has the meaning set out in section 285 of FSMA;]

[F11“third country CSD” has the meaning set out in section 285 of FSMA;]

“title transfer financial collateral arrangement” has the meaning set out in regulation 3 of the Financial Collateral Arrangements (No.2) Regulations 2003.

(2) In the definition of “security interest”, in sub-paragraph (c), in its application to Scotland, “fixed charge” means a fixed security within the meaning given by section 47(1) of the Bankruptcy and Diligence etc. (Scotland) Act 2007 M12.

[F17(2A) In these Regulations a reference to the investment bank’s own bank accounts includes a reference to any account, other than a client money account, opened by the administrator for the purposes of the special administration.]

(3) References in these Regulations to a regulated activity must be read with—

(a)section 22 of FSMA (classes of regulated activity and categories of investment);

(b)any relevant order under that section; and

(c)Schedule 2 to that Act (regulated activities).

(4) For the purposes of a reference in these Regulations to inability to pay debts—

(a)an investment bank that is in default on an obligation to pay a sum due and payable under an agreement is to be treated as unable to pay its debts; and

(b)section 123 of the Insolvency Act (inability to pay debts) also applies,

and for the purposes of sub-paragraph (a), “agreement” means an agreement the making or performance of which constitutes or is part of a regulated activity carried on by the investment bank.

(5) Expressions used in these Regulations and in the Insolvency Act have the same meaning as in that Act, and the provision made by paragraphs 100 and 101 of Schedule B1 (as applied by regulation 15) in respect of the effect of the references in that Schedule also apply in respect of the same references where used in these Regulations.

(6) Expressions used in these Regulations and in the Companies Act 2006 M13 have the same meaning as in that Act.

(7) Regulation 26 applies with respect to the application of these Regulations to Northern Ireland.]

Textual Amendments

Marginal Citations

M8Section 155 was amended by S.I. 1991/880, S.I. 1998/1748 and by S.I. 2009/853.

M10Relevant amendments to Schedule B1 were made by S.I. 2003/2096, S.I. 2005/879, S.I. 2007/2974, S.I. 2008/948, S.I. 2008/1897, S.I. 2009/1941 and S.I. 2010/18.

OverviewU.K.

3.—(1) These Regulations provide for a procedure to be known as investment bank special administration (“special administration”).

(2) The main features of special administration are that—

(a)an investment bank enters the procedure by court order;

(b)the order appoints an administrator;

(c)the administrator is to pursue the special administration objectives in accordance with the statement of proposals approved by the meeting of creditors and clients and, in certain circumstances, the [F18FCA or, where relevant, the PRA]; and

(d)in other respects the procedure is the same as for Schedule B1 administration under the Insolvency Act, subject to specific modifications, and the inclusion of certain liquidation provisions of the Insolvency Act.

(3) Where the investment bank is a deposit-taking bank with eligible depositors (within the meaning of section 93(3) of the Act)—

(a)regulations 4 to 8 do not apply; and

(b)in addition to the insolvency procedures established under Parts 2 and 3 of the Act, the Bank of England [F19, the FCA or, in certain cases, the PRA], may apply for an order to put the bank into—

[F20(i)]special administration (bank insolvency) as set out in Schedule 1 (as applied by regulation 9); or

[F20(ii)]special administration (bank administration) as set out in Schedule 2 (as applied by regulation 9).

(4) Where the investment bank is a deposit-taking bank but has no eligible depositors, the investment bank must not be put into special administration (bank insolvency); instead the investment bank may be put into either—

(a)special administration (bank administration), (in which case regulations 4 to 8 do not apply); or

(b)special administration.

Textual Amendments

Special administration orderU.K.

4.—(1) An investment bank special administration order (“special administration order”) is an order appointing a person as the investment bank administrator (“administrator”) of an investment bank.

(2) A person is eligible for appointment as administrator under a special administration order if qualified to act as an insolvency practitioner [F21in relation to the investment bank].

(3) An appointment may be made only if the person has consented to act.

(4) For the purpose of these Regulations—

(a)an investment bank is “in special administration” while the appointment of the administrator has effect;

(b)an investment bank “enters special administration” when the appointment of the administrator takes effect;

(c)an investment bank ceases to be in special administration when the appointment of the administrator ceases to have effect in accordance with these Regulations; and

(d)an investment bank does not cease to be in special administration merely because an administrator vacates office (by reason of resignation, death or otherwise) or is removed from office.

Textual Amendments

ApplicationU.K.

5.—(1) An application to the court for a special administration order may be made to the court by—

(a)the investment bank;

(b)the directors of the investment bank;

(c)one or more creditors of the investment bank;

(d)the designated officer for a magistrates' court in the exercise of the power conferred by section 87A of the Magistrates' Courts Act 1980 M14 (fines imposed on companies);

(e)(subject to paragraph (7)), a contributory of the investment bank;

(f)a combination of persons listed in sub-paragraphs (a) to (e);

(g)the Secretary of State; F22...

[F23(h)the FCA; or

(i)if the investment bank is a PRA-authorised person, the PRA].

(2) Where an application is made by a person other than the [F24FCA], the [F24FCA] is entitled to be heard at—

(a)the hearing of the application for special administration; and

(b)any other hearing of the court in relation to the investment bank under these Regulations.

[F25(2A) Where an application is made by a person other than the PRA in relation to an investment bank which is a PRA-authorised person, the PRA is entitled to be heard at—

(a)the hearing of the application for special administration; and

(b)any other hearing of the court in relation to the investment bank under these Regulations.]

(3) An application must nominate a person to be appointed as the administrator.

(4) As soon as is reasonably practicable after making the application, the applicant shall notify—

(a)a person who gave notice to the [F26appropriate regulator] in accordance with Condition 1 of regulation 8; and

(b)such other persons as may be prescribed.

(5) An application may not be withdrawn without the permission of the court.

(6) In sub-paragraph (1)(c), “creditor” includes a contingent creditor and a prospective creditor.

(7) A contributory (“C”) is not entitled to make an application for special administration unless either—

(a)the number of members is reduced below 2; or

(b)the shares in respect of which C is a contributory, or some of them, either were originally allotted to C, or have been held by C and registered in C's name, for at least 6 months during the 18 months before the commencement of the special administration, or have devolved on C through the death of a former holder.

Textual Amendments

Marginal Citations

Grounds for applyingU.K.

6.—(1) In this regulation—

(a)Ground A is that the investment bank is, or is likely to become, unable to pay its debts;

(b)Ground B is that it would be fair to put the investment bank into special administration; and

(c)Ground C is that it is expedient in the public interest to put the investment bank into special administration.

(2) The [F27FCA or, where relevant, the PRA] or the persons listed in regulation 5(1)(a) to (e) may apply for a special administration order only if they consider that Ground A or Ground B is met.

(3) The Secretary of State may apply for a special administration order only if it appears to the Secretary of State that Grounds B and C are met.

(4) The sources of information on the basis of which the Secretary of State may reach a decision on Ground C include those listed in section 124A(1) M15 of the Insolvency Act (petition for winding up on grounds of public interest).

Textual Amendments

Marginal Citations

Powers of the courtU.K.

7.—(1) On an application for a special administration order the court may—

(a)grant the application in accordance with paragraph (2);

(b)dismiss the application;

(c)adjourn the hearing (generally or to a specified date);

(d)make an interim order;

(e)on the application of the [F28FCA], treat the application as an administration application by the [F28FCA] under Schedule B1 in accordance with section 359(1) of FSMA M16; or

[F29(ea)on the application of the PRA, treat the application as an administration application by the PRA under Schedule B1 in accordance with section 359(1A) of FSMA;]

(f)make any other order which the court thinks appropriate.

(2) The court may make a special administration order if it is satisfied that the company is an investment bank and—

(a)(on the application of persons listed in regulation 5(1)(a) to (e) [F30, the FCA or PRA]) that Ground A or Ground B in regulation 6 is satisfied;

(b)(on the application of the Secretary of State) if satisfied that Grounds B and C in regulation 6 are satisfied.

(3) Where the application for a special administration order is made by members of the investment bank as contributories on the basis that Ground B in regulation 6 is satisfied, the court, if it is of the opinion that—

(a)the applicants are entitled to relief either by a special administration order being made in respect of the investment bank or by some other means; and

(b)in the absence of any other remedy it would be fair that the special administration order be made in respect of the investment bank,

shall make a special administration order; but this does not apply if the court is also of the opinion that an alternative remedy is available to the applicants and that they are acting unreasonably in applying for a special administration order instead of pursuing that other remedy.

(4) A special administration order takes effect in accordance with its terms.

Textual Amendments

Marginal Citations

M16Section 359 was substituted by the Enterprise Act 2002 (c. 40), section 248(3), Schedule 17, paragraphs 53, 55, and by the Insolvency (Northern Ireland) Order 2005 (S.I. 2005/1455), article 3(3), Schedule 2, paragraphs 56, 58(1), (2), (3), (4). There are other amendments to this section that are not relevant here.

Notice to [F31appropriate regulator] of preliminary steps to other insolvency proceedingsU.K.

8.—(1) An application for an administration order in respect of an investment bank may not be made unless the conditions in paragraph (5) are satisfied.

[F32(1A) An application for an order under regulation 8 of the Payment and Electronic Money Institution Insolvency Regulations 2021 in respect of an investment bank may not be made unless the conditions in paragraph (5) are satisfied.]

(2) A petition for a winding up order in respect of an investment bank may not be made unless the conditions in paragraph (5) are satisfied.

(3) A resolution for the voluntary winding up of an investment bank may not be made unless the conditions in paragraph (5) are satisfied.

(4) An administrator of an investment bank may not be appointed unless the conditions in paragraph (5) are satisfied.

(5) The conditions are as follows—

(a)Condition 1 is that the [F31appropriate regulator] has been notified of the preliminary steps taken in respect of an insolvency procedure;

(b)Condition 2 is that a copy of the notice complying with Condition 1 has been filed (in Scotland, lodged) with the court (and made available for public inspection by the court);

(c)Condition 3 is that —

(i)the period of 2 weeks, beginning with the day on which the notice is received by the [F31appropriate regulator], has ended, or

(ii)the [F31appropriate regulator] has informed the person who gave the notice that it consents to the insolvency procedure to which the notice relates going ahead; and

(d)Condition 4 is that no application for a special administration order is pending.

(6) Where the [F31appropriate regulator] receives notice under Condition 1, it shall inform the person who gave the notice, within the period in Condition 3—

(a)whether or not it consents to the insolvency procedure to which the notice relates going ahead;

(b)whether or not it intends to apply for that (or an alternative) insolvency procedure itself; or

(c)whether it intends to apply for a special administration order.

(7) Arranging for the giving of the notice in order to satisfy Condition 1 may be treated as a step with a view to minimising the potential loss to the investment bank's creditors for the purpose of section 214 of the Insolvency Act (as applied by regulation 15).

(8) In this regulation—

[F33“appropriate regulator” means—

(a)

in relation to an investment bank which is a PRA-authorised person, the FCA and the PRA (and any references in this regulation to the “appropriate regulator” are to be read as references to each of the FCA and PRA);

(b)

in any other case, the FCA;]

“investment bank” does not include an investment bank that is a deposit-taking bank; and

“preliminary steps taken in respect of an insolvency procedure” means that—

(a)

an application for an administration order has been made;

(aa)

[F34an application for an order under regulation 8 of the Payment and Electronic Money Institution Insolvency Regulations 2021 has been made;]

(b)

a petition for a winding up order has been presented;

(c)

a resolution for voluntary winding up has been proposed by the investment bank; or

(d)

a resolution for the appointment of an administrator has been proposed.

Textual Amendments

Application where investment bank is a deposit-taking bankU.K.

9.  Subject to regulation 3(4), where the investment bank is a deposit-taking bank then Schedule 1 (Special administration (bank insolvency)) and Schedule 2 (Special administration (bank administration)) apply.

Special administration objectivesU.K.

10.—(1) The administrator has three special administration objectives (“the special administration objectives”)—

(a)Objective 1 is to ensure the return of client assets as soon as is reasonably practicable;

(b)Objective 2 is to ensure timely engagement with market infrastructure bodies and the Authorities pursuant to regulation 13; and

(c)Objective 3 is to either—

(i)rescue the investment bank as a going concern, or

(ii)wind it up in the best interests of the creditors.

(2) In relation to sub-paragraph (1)(a), the administrator is entitled to deal with and return client assets in whatever order the administrator thinks best achieves Objective 1.

(3) The order in which the special administration objectives are listed in this regulation is not significant: subject to regulation 16, the administrator must—

(a)commence work on each objective immediately after appointment, prioritising the order of work on each objective as the administrator thinks fit, in order to achieve the best result overall for clients and creditors; and

(b)set out, in the statement of proposals made under paragraph 49 of Schedule B1 (as applied by regulation 15), the order in which the administrator intends to pursue the objectives once the statement has been approved.

(4) The administrator must work to achieve each objective, in accordance with the priority afforded to the objective as provided in paragraph (3), as quickly and efficiently as is reasonably practicable.

(5) For the purposes of Objective 1, “return of client assets” or where the client assets are “returned” to the client means that the investment bank relinquishes full control over the assets for the benefit of the client to the extent of—

(a)the client's beneficial entitlement to those assets (where the assets in question have been held on trust by the investment bank); or

(b)the client's right to those assets as bailor or otherwise (where the investment bank has been holding those assets as bailee (in Scotland, as custodier of those assets) or by some other means to the order of the client);

having taken into account any entitlement the investment bank might have, or a third party might have, in respect of those assets, of which the administrator is aware at the time the assets are returned to the client.

(6) In relation to paragraph (5)—

(a)where client assets are returned to a person other than the client, for “client” substitute “ claimant ”; and

(b)where the claimant is the investment bank, for “relinquishes control over the assets for the benefit of the client” substitute “ takes full title to the assets for its benefit ”.

[F35Objective 1—duty of administrator to work with the FSCSU.K.

10A.—(1) The administrator must—

(a)as soon as reasonably practicable after appointment as the administrator, inform the FSCS of the value of client assets held by the investment bank for each of the clients of the investment bank;

(b)keep the FSCS informed about progress towards the achievement of Objective 1;

(c)comply, as soon as reasonably practicable, with any request by the FSCS for the provision of information or the production of documents relating to the client assets held by the investment bank; and

(d)at the request of the FSCS, provide any assistance identified by the FSCS as being necessary for the purpose of enabling the FSCS to administer the compensation scheme in relation to the entitlement of clients of the investment bank to compensation.

(2) Where the administrator is required by this regulation to provide any information or produce any document, the administrator may provide the information or produce the document in hard copy or in electronic format.

(3) This regulation does not apply if the administrator is appointed under a special administration (bank insolvency) order (within the meaning given by paragraph 2 of Schedule 1).]

Textual Amendments

[F36Objective 1—transfer of client assetsU.K.

10B.—(1) This regulation applies where—

(a)the administrator, in pursuit of Objective 1 (whether or not also in pursuit of Objective 3) enters into a binding arrangement with another financial institution for the transfer to that institution (“the transferee”) of all or some of the property, rights and liabilities of the investment bank; and

(b)for the purposes of that transfer the arrangement includes provision for a transfer of client assets to the transferee or to a person who has undertaken to receive or hold any of the assets to the order of the transferee.

(2) This regulation is subject to the restrictions on partial property transfers in regulations 10C to 10G.

(3) The transfer of client assets which the investment bank has undertaken to hold under a client contract and of relevant rights and liabilities is to have effect in spite of any—

(a)restriction affecting what can or cannot be assigned or transferred by the investment bank (whether generally or by a particular person or particular description of persons);

(b)requirement to give notice to, or obtain the consent (however referred to) of, any person who is party to the client contract; or

(c)entitlement of any person to the return of the assets otherwise than by transfer under the arrangement.

(4) For these purposes it does not matter whether a restriction, requirement or entitlement has effect by virtue of a provision contained in a contract or an enactment, or in any other way, except that in paragraph (3)(a) a restriction does not include a restriction in client money rules.

(5) To the extent that rights and liabilities under a client contract are transferred by the arrangement, the contract is to be treated for the purposes of the arrangement as if it had been made by the transferee rather than the investment bank.

(6) The transferee may vary the terms of client contracts without obtaining the agreement of persons who are party to the contracts to the extent necessary for giving effect to the transfer and ensuring that the powers, rights and obligations of the transferee acting as a trustee are exercisable.

(7) Where necessary for the purposes of the arrangement the administrator may disclose to the transferee all information which is, in the administrator’s view, relevant to the transfer of client assets or rights and liabilities under client contracts.

(8) Subject to paragraph (9), paragraph (7) overrides any contractual or other requirement to keep information in confidence.

(9) Paragraphs (7) and (8) do not authorise a disclosure, in contravention of any provisions of the Data Protection Act 1998, of any personal data which are not exempt from the provisions of that Act.

(10) The arrangement must include such provision as the administrator thinks necessary to ensure that clients whose assets are to be transferred will be able to exercise their rights in relation to the assets as soon as reasonably practicable after the transfer.

(11) For the purposes of this regulation, if the arrangement purports to transfer all of the property, rights and liabilities of the investment bank, it is to be treated as having done so effectively (so that none of regulations 10C to 10G applies to it) notwithstanding the possibility that any property, right or liability purportedly transferred is foreign property and might not have been effectively transferred by the arrangement.

(12) In this regulation a reference to rights and liabilities of the investment bank or to rights and liabilities under a client contract, in relation to property held by the investment bank on trust (however arising), includes a reference to—

(a)the legal and beneficial interest of the investment bank in the property; and

(b)the powers and obligations of the investment bank acting as a trustee of the property.

(13) In this regulation—

“client assets” means client assets (within the meaning given by section 232(4) of the Act) and assets equivalent to those which the investment bank undertook to hold for clients;

“client contract” means a contract under which the investment bank undertook to—

(a)

receive or hold client assets; or

(b)

provide any services or enter into any transactions for the benefit of a particular client in relation to the investment bank’s holding of client assets for that client;

“partial property transfer” means an arrangement of a kind referred to in paragraph (1) for the transfer of some, but not all, of the property, rights and liabilities of the investment bank; and

“relevant rights and liabilities”, in relation to a client contract, means the rights and liabilities under the contract so far as they have effect in relation to any client assets which are to be transferred by the arrangement.]

Textual Amendments

[F36Restrictions on partial property transfers—general provisionU.K.

10C.—(1) Regulation 10B has effect in relation to a partial property transfer as if paragraph (3)(b) of that regulation were omitted.

(2) Paragraph (1) does not apply in relation to the transfer of protected rights and liabilities (within the meaning given in regulation 10D(2)) or the transfer of any property, benefits, rights or liabilities to which regulation 10E, 10F or 10G applies.

(3) A partial property transfer must include such provision as the administrator thinks appropriate—

(a)to ensure that a client whose client assets are to be transferred by the arrangement will be entitled to demand a transfer back to the investment bank of assets which are transferred (“reverse transfer”);

(b)for the identification of assets for the purposes of a reverse transfer; and

(c)unless the investment bank has ceased to satisfy Condition 1 in section 232 of the Act (definition of “investment bank”), to ensure that the transferee is obliged to give effect to the reverse transfer as soon as reasonably practicable after the demand is made.

(4) The administrator must take all steps necessary to give effect to the reverse transfer.

(5) A reverse transfer has effect to transfer back to the investment bank the relevant rights and liabilities transferred by the arrangement so far as they have effect in relation to the client assets which are transferred back to the investment bank.

(6) In this regulation “client assets”, “partial property transfer” and “relevant rights and liabilities” have the meaning given in regulation 10B(13).]

Textual Amendments

[F36Restrictions on partial property transfers—set-off and netting arrangementsU.K.

10D.—(1) A partial property transfer may not provide for the transfer of some, but not all, of the protected rights and liabilities between a client or other person (“C”) and the investment bank.

(2) Rights and liabilities between C and the investment bank are protected if—

(a)they are rights and liabilities which C or the investment bank is entitled to set off or net under a particular set-off arrangement, netting arrangement or title transfer financial collateral arrangement which C has entered into with the investment bank; and

(b)they are not excluded rights or excluded liabilities.

(3) For the purpose of paragraph (1), a partial property transfer which purports to transfer all of the protected rights and liabilities between C and the investment bank is to be treated as having done so effectively (and not in contravention of paragraph (1)) notwithstanding the possibility that any of the protected rights or liabilities are foreign property and might not have been effectively transferred by the arrangement.

(4) For the purposes of paragraph (2), it is immaterial whether or not—

(a)the arrangement which permits C or the investment bank to set off or net rights and liabilities also permits C or the investment bank to set off or net rights and liabilities with another person; or

(b)the right of C or the investment bank to set off or net is exercisable only on the occurrence of a particular event.

(5) A partial property transfer made in contravention of this regulation does not affect the exercise of the right to set off or net.

(6) In this regulation—

“excluded rights”, in relation to rights between C and the investment bank, has the same meaning as it has in relation to rights between C and a banking institution by virtue of articles 1(3) and 3 of the Banking Act 2009 (Restriction of Partial Property Transfers) Order 2009, except that in article 1(3), in the definition of “excluded rights”—

(a)

in sub-paragraph (e) the reference to subordinated debt is to be read as a reference to subordinated debt issued by C or by the investment bank; and

(b)

in sub-paragraph (f)—

(i)

the reference to a set-off arrangement, netting arrangement or title transfer financial collateral arrangement is to be read as a reference to a set-off arrangement, netting arrangement or title transfer financial collateral arrangement referred to in this regulation; and

(ii)

the references to transferable securities are to be read as references to transferable securities issued by C or by the investment bank;

“excluded liabilities” means the liabilities which correspond with excluded rights;

“netting arrangement” means an arrangement under which a number of claims or obligations can be converted into a net claim or obligation and includes, in particular—

(a)

a “close-out” netting arrangement, under which actual or theoretical debts are calculated during the course of a contract for the purpose of enabling them to be set off against each other or to be converted into a net debt;

(b)

an arrangement which provides for netting (within the meaning given by regulation 2(1) of the Financial Markets and Insolvency (Settlement Finality) Regulations 1999); and

(c)

an arrangement which includes a close-out netting provision (within the meaning given by regulation 3(1) of the Financial Collateral Arrangements (No 2) Regulations 2003);

“partial property transfer” has the same meaning as in regulation 10B(13);

“set-off arrangement” means an arrangement under which two or more debts, claims or obligations can be set off against each other; and

“title transfer financial collateral arrangement” has the meaning given by regulation 3(1) of the Financial Collateral Arrangements (No 2) Regulations 2003.]

Textual Amendments

[F36Restrictions on partial property transfers—security interestsU.K.

10E.—(1) Subject to paragraph (6), paragraphs (3), (4) and (5) apply where under any binding arrangement one party owes to the other a liability which is secured against any property or rights.

(2) For these purposes it is immaterial whether or not—

(a)the liability is secured against all or substantially all of the property or rights of a person;

(b)the liability is secured against specified property or rights; or

(c)the property or rights against which the liability is secured are owned by the person who owes the liability.

(3) A partial property transfer may not transfer the property or rights against which the liability is secured unless that liability and the benefit of the security are also transferred.

(4) A partial property transfer may not transfer the benefit of the security unless the liability which is secured is also transferred.

(5) A partial property transfer may not transfer the liability unless the benefit of the security is also transferred.

(6) Paragraphs (3), (4) and (5) do not apply if the investment bank entered into the binding arrangement in contravention of a rule prohibiting such arrangements made by the FCA or the PRA under FSMA or otherwise than in accordance with the investment bank’s Part 4A permission (within the meaning given by section 55A(5) of FSMA).

(7) For the purposes of paragraphs (3), (4) and (5), a partial property transfer which purports to transfer any property, rights and liabilities is to be treated as having done so effectively (and not in contravention of any of those paragraphs) notwithstanding the possibility that any of that property, or of those rights or liabilities, is foreign property and might not have been effectively transferred by the arrangement.

(8) In this regulation “partial property transfer” has the same meaning as in regulation 10B(13).]

Textual Amendments

[F36Restrictions on partial property transfers—capital market arrangementsU.K.

10F.—(1) Subject to paragraph (2), a partial property transfer may not provide for the transfer of some, but not all, of the property, rights and liabilities which are or form part of a capital market arrangement to which the investment bank is a party.

(2) Paragraph (1) does not apply where the only property, rights and liabilities which are, or are not, transferred relate to deposits.

(3) For the purpose of paragraph (1), a partial property transfer which purports to transfer all of the property, rights and liabilities which are or form part of a capital market arrangement to which the investment bank is a party is to be treated as having done so effectively (and not in contravention of paragraph (1)) notwithstanding the possibility that any property, right or liability purportedly transferred is foreign property and might not have been effectively transferred by the arrangement.

(4) In this regulation—

“capital market arrangement” has the meaning given by paragraph 1 of Schedule 2A to the Insolvency Act;

“deposit” has the same meaning as in article 5 of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001, disregarding the exclusions in other articles of that Order; and

“partial property transfer” has the same meaning as in regulation 10B(13).]

Textual Amendments

[F36Restrictions on partial property transfers—financial marketsU.K.

10G.—(1) A partial property transfer may not transfer property, rights or liabilities to the extent that doing so would have the effect of modifying, modifying the operation of, or rendering unenforceable—

(a)a market contract;

(b)the default rules of a recognised investment exchange [F37, recognised clearing house or recognised CSD]; or

(c)the rules of a recognised investment exchange [F37, recognised clearing house or recognised CSD] as to the settlement of market contracts not dealt with under its default rules.

(2) A partial property transfer is void in so far as it is made in contravention of this regulation.

(3) In this regulation—

“default rules” has the meaning given in section 188 of the Companies Act 1989; and

“partial property transfer” has the same meaning as in regulation 10B(13).]

Textual Amendments

[F38Objective 1—post-administration reconciliation of accounts and records relating to client moneyU.K.

10H.—(1) Immediately after being appointed as the administrator, the administrator must carry out a client money reconciliation in accordance with paragraph (2) and make any transfer required by paragraph (3) or (4).

(2) The client money reconciliation must—

(a)be carried out in accordance with the method for carrying out client money reconciliations adopted by the investment bank to meet client money rules, whether or not the method adopted is in compliance with those rules;

(b)be based on records and accounts of the investment bank as they stood immediately after the last such reconciliation by the investment bank (but taking no further account of money received, or payments, transfers or transactions made, by the investment bank of which account was taken for the purposes of that reconciliation); and

(c)take account of money received, and payments, transfers and transactions made, by the investment bank after the last such reconciliation and before the appointment of the administrator.

(3) Where the client money reconciliation shows that amount A exceeds amount B, the administrator must transfer an amount equal to the difference from the investment bank’s own bank accounts to any client money account other than a client transaction account.

(4) Where the client money reconciliation shows that amount B exceeds amount A, the administrator must transfer an amount equal to the difference from the client money accounts to the investment bank’s own bank accounts.

(5) In this regulation—

“amount A” means the total amount of client money which the investment bank, according to its own records and accounts, is required to hold in accordance with client money rules;

“amount B” means the total amount of client money which the investment bank holds in client money accounts;

“client money reconciliation” means a reconciliation of amount A with amount B; and

“client transaction account” means an account with any person which the investment bank maintains for the purpose of—

(a)

any transaction with or by that person for a client’s benefit; or

(b)

meeting a client’s obligation to provide collateral for a transaction.]

Textual Amendments

[F38Objective 1—removal of right to interest on unsecured claims for the return of client moneyU.K.

10I.—(1) This regulation applies where—

(a)a debt arises from a liability of the investment bank to return client money;

(b)the client has not submitted a claim for payment of the debt by way of a distribution from the client money pool; and

(c)the client makes an unsecured claim for payment of the debt.

(2) The client is not entitled to interest on the debt for the period commencing on the date on which the investment bank entered special administration, except interest on such part of the debt which remains after deduction of the total amount which the client would have received on a claim for payment of the debt by way of a distribution from the client money pool.]

Textual Amendments

Objective 1 – distribution of client assetsU.K.

11.—(1) If the administrator thinks it necessary in order to expedite the return of client assets, the administrator may set a bar date for the submission of—

(a)claims to the beneficial ownership, or other form of ownership, of the client assets; or

(b)claims of persons in relation to a security interest asserted over, or other entitlement to, those assets.

(2) Claims under paragraph (1) include claims that are contingent or disputed.

(3) In setting a bar date, the administrator must allow a reasonable time after notice of the special administration has been published (in accordance with insolvency rules) for persons to be able to calculate and submit their claims.

[F39(4) Subject to paragraph (4A), where the administrator sets a bar date—

(a)the administrator must return client assets in accordance with the prescribed procedure; but

(b)no client assets may be returned after the bar date has been set unless the court has given its approval on an application made by the administrator in accordance with the prescribed procedure.

(4A) The administrator may, at any time after setting a bar date, return client assets without the approval of the court if (and only if)—

(a)at that time the administrator has not made any application for court approval to return client assets;

(b)the administrator has identified the person who is beneficially entitled to the assets or has a right to the assets as bailor or otherwise; and

(c)the assets are not held by the investment bank in a client omnibus account (within the meaning given in regulation 12(9)).]

(5) Where the administrator, after setting a bar date, has returned client assets [F40with the approval of the court], if the administrator then receives a late claim of a type described in paragraph (1) in respect of assets that have been returned—

(a)there shall be no disruption to those client assets that have already been returned;

(b)the person to whom the assets have been returned acquires good title to them as against the late-claiming claimant,

and insolvency rules shall prescribe how the late claim is to be treated by the administrator.

(6) The restrictions in paragraph (5) shall not apply where—

(a)the client assets were returned to a person (“P”) by the administrator in bad faith in which P was complicit; or

(b)P is later found to have made a false claim to those assets.

(7) In this regulation, “bar date” means a date by which claims as described in paragraph (1) must be submitted.

(8) This regulation does not apply to [F41client money].

Textual Amendments

Objective 1 - shortfall in client assets held in omnibus accountU.K.

12.—(1) This regulation applies if—

(a)the administrator becomes aware that there is a shortfall in the amount available for distribution of securities of a particular description held by the investment bank as client assets in a client omnibus account;

(b)the shortfall cannot be remedied following the resolution of on-going disputes; and

(c)the assets in question are not [F42client money].

(2) The administrator, in making the distribution, shall ensure (subject to the treatment of late claims as described in regulation 11(5)) that the shortfall referred to in paragraph (1) be borne pro rata by all clients for whom the investment bank holds securities of that particular description in that same account in proportion to their beneficial interest in those securities.

(3) A person (including the investment bank) (“a security holder”) with a security interest over securities held in the client omnibus account on behalf of a particular client shall be entitled to participate in distributions and shortfall claims in respect of those securities in accordance with their entitlement as against that client (subject to the treatment of late claims as described in regulation 11(5)).

(4) Security holders shall not, at any time, be entitled to claim in aggregate in excess of the distribution which the client would have been entitled to if there had been no claim by that client.

(5) Any reduction of the client's beneficial interest as a result of the application of paragraph (2) shall limit correspondingly the rights of the security holder in respect of the distribution, (but this shall not affect the right of the security holder in respect of the client's shortfall claim as described in paragraph (7)).

(6) Where there is a dispute between persons as to their respective share of a distribution, the administrator may—

(a)make the distribution in accordance with an agreement drawn up between the parties in dispute; or

(b)lodge the securities that are the subject of the dispute with the court,

and if the administrator pursues either course of action, the administrator's obligations in respect of Objective 1 with regard to these securities shall be deemed to be discharged.

(7) The shortfall borne by a client under paragraph (2) is that client's shortfall claim against the investment bank (“shortfall claim”) and shall rank as an unsecured claim.

(8) The value of a client's shortfall claim shall be based on the market price for those securities to which the shortfall claim relates on the date the investment bank entered special administration or, if that is not a business day, on the last business day prior to the investment bank entering special administration.

(9) In this regulation—

“client omnibus account” means an account held by the investment bank, or another institution in the name of the investment bank, made up of multiple accounts of clients of the investment bank;

“distribution” means the return of client assets that are securities of a particular description;

“market price” means—

(a)

the value of the securities on the day in question as determined by a reputable source used by the investment bank, immediately prior to the investment bank entering special administration, for valuing or reporting in respect of those securities; or

(b)

if this is not practicable, the value of those securities on the day in question as determined by the administrator which reflects, in the administrator's opinion, a fair and reasonable price for those securities; and

“securities of a particular description” means securities issued by the same issuer which are of the same class of shares or stock; or in the case of securities other than shares or stock, which are of the same currency and denomination and treated as forming part of the same issue.

Textual Amendments

[F43Objective 1—distribution of client moneyU.K.

12A.—(1) If the administrator thinks it necessary in order to expedite the return of client money, the administrator may by notice set a bar date for the submission of client money claims.

(2) In setting a bar date the administrator must allow a reasonable time after notice of the special administration has been published (in accordance with insolvency rules) for persons to be able to calculate and submit client money claims.

(3) As soon as reasonably practicable after the bar date, the administrator must make a distribution of client money in accordance with client money rules to the clients or other persons who are entitled to payment under client money claims.

(4) A person who submits a client money claim after the bar date, but before the return of client money after that date, must, so far as is reasonably practicable, be included within the distribution of client money under paragraph (3).

(5) When determining the amount to be distributed under paragraph (3), the administrator must make allowance for the entitlement to the return of client money, by way of a subsequent distribution from the client money pool, of persons who have neither made a client money claim nor received any payment under a previous distribution of client money.

(6) Where the administrator has returned client money after the bar date, no payment or part of any payment made to any person under the distribution may be recovered for the purpose of meeting a late claim.

(7) The restriction in paragraph (6) does not apply where—

(a)client money was returned to a person by the administrator in bad faith in which that person was complicit; or

(b)a person to whom client money was returned is later found to have made a false claim to the money.

(8) Where the administrator determines that a client or other person who makes a late claim would have participated in the distribution of client money under paragraph (3) if the claim had been submitted before the return of client money after the bar date, the administrator must include the claimant within a subsequent distribution from the client money pool.

(9) In this regulation—

“bar date” means a date by which clients are invited to submit client money claims for the purposes of this regulation;

“client money claims” are claims for the return of client money which has been pooled in accordance with client money rules; and

“late claim” means a client money claim received after the bar date other than a claim received after that date from a person who is included within the distribution of client money under paragraph (3).]

Textual Amendments

[F43Objectives 1 and 3—client assets (other than client money) which the administrator is unable to return to clientsU.K.

12B.—(1) This regulation applies where the administrator, after setting a soft bar date, includes in the distribution plan provision for the option of setting a hard bar date.

(2) If the administrator thinks it necessary in order to expedite the return of client assets, the administrator may by a hard bar date notice set a hard bar date.

(3) The administrator may not set a hard bar date without the approval of the court given on application by the administrator.

(4) A late claim of a type described in regulation 11(1) which is submitted in response to the setting of a bar date under that regulation on or after the date on which the administrator sets a hard bar date is to be treated as a client asset claim.

(5) Where the administrator sets a hard bar date, the administrator, after that date—

(a)must return client assets to eligible claimants;

(b)may dispose of all client assets which the investment bank still holds after the return of client assets to any eligible claimants (“residual assets”); and

(c)must transfer the proceeds of any disposal of residual assets to the investment bank’s own bank accounts.

(6) A person who acquires client assets on a disposal of residual assets acquires good title to them as against all clients.

(7) Where the administrator receives a client asset claim after the hard bar date (“late claim”) and—

(a)the administrator has not made any arrangements for the disposal of the residual assets, or

(b)such arrangements as the administrator has made for their disposal do not prevent the administrator from returning them,

the administrator must meet the late claim out of the residual assets.

(8) Where the administrator has returned client assets after setting a hard bar date and then receives a late claim in respect of assets that have been returned—

(a)none of those assets may be recovered for the purpose of meeting the late claim; and

(b)the person to whom the assets have been returned acquires good title to them as against the late-claiming claimant.

(9) The restrictions in paragraph (8) do not apply where—

(a)the client assets were returned to a person by the administrator in bad faith in which that person was complicit; or

(b)a person to whom client assets were returned is later found to have made a false claim to them.

(10) Where a disposal of residual assets prevents the administrator from meeting a late claim—

(a)the claim which the late-claiming claimant has against the investment bank in consequence of the disposal ranks as an unsecured claim; and

(b)the value of the unsecured claim is the value of the consideration paid to the administrator for the assets disposed of which would have been returned to that claimant if their client asset claim had been made before the hard bar date.

(11) No interest is payable on the debt for which a person makes an unsecured claim under paragraph (10).

(12) This regulation does not apply to client money.

(13) In this regulation—

“client asset claim” means a claim of a type described in regulation 11(1) which is submitted in response to the setting of a hard bar date;

“distribution plan” means the plan for the return of client assets which the administrator is required to draw up in accordance with insolvency rules after setting a soft bar date;

“eligible claimant” means—

(a)

a person to whom the administrator has already returned client assets under regulation 11; or

(b)

a person who—

(i)

submits a client asset claim on or before the hard bar date; and

(ii)

would have been eligible for a return of client assets under regulation 11 if the claim had been submitted in response to the setting of the soft bar date;

“hard bar date” means a final date (subject to provision for late claims in paragraphs (7) to (10)) for the submission of claims of a type described in regulation 11(1);

“hard bar date notice” means a notice which specifies a hard bar date and includes a statement that after the end of that day the administrator—

(a)

may dispose of client assets still held by the investment bank after the administrator has returned client assets to any eligible claimants; and

(b)

may, consequently, be unable to meet any further client asset claims; and

“soft bar date” means a bar date set under regulation 11.]

Textual Amendments

[F43Objectives 1 and 3—client money which the administrator is unable to return to clientsU.K.

12C.—(1) This regulation applies where the administrator, after setting a bar date under regulation 12A, thinks it is appropriate, in order to achieve Objective 1, to close the client money pool and treat any further claim for the return of client money as an unsecured claim.

(2) The administrator may by a hard bar date notice set a hard bar date.

(3) The administrator may not set a hard bar date without the approval of the court given on application by the administrator.

(4) Where the administrator sets a hard bar date, the administrator may not meet any final money claim received after the hard bar date.

(5) A final money claim received by the administrator after the hard bar date ranks as an unsecured claim.

(6) No interest is payable on the debt for which a person makes such a claim, except interest on such part of the debt which remains after deduction of the total amount which the client would have received by way of a distribution from the client money pool if the final money claim had been received by the administrator on or before the hard bar date.

(7) In this regulation—

“final money claim” means a claim for the return of client money which is submitted in response to the setting of a hard bar date;

“eligible claimant” means a person—

(a)

to whom the administrator has already made a distribution of client money without receiving a claim for the return of client money to that person;

(b)

who has submitted a claim for the return of client money other than a final money claim; or

(c)

who submits a final money claim on or before the hard bar date;

“hard bar date” means a final date (subject to paragraph (5)) for the submission of claims for the return of client money; and

“hard bar date notice” means a notice which specifies a hard bar date and includes a statement that after the end of that day the administrator—

(a)

may, in accordance with client money rules, transfer to the investment bank’s own bank accounts any balance of the client money pool which the investment bank holds after the return of client money to eligible claimants; and

(b)

may not meet any further final money claims.]

Textual Amendments

[F43Powers of the court on application to set a hard bar dateU.K.

12D.—(1) On an application under regulation 12B(3) or 12C(3) for the approval of the court to set a hard bar date the court may—

(a)make an order approving the setting of a hard bar date;

(b)adjourn the hearing of the application conditionally or unconditionally; or

(c)make any other order that the court thinks appropriate.

(2) The court may make an order under paragraph (1)(a) only if—

(a)it is satisfied that the administrator has taken all reasonable measures to identify and contact persons who may be entitled to the return of client assets; and

(b)it considers that if a hard bar date is set there is no reasonable prospect—

(i)that the administrator will receive claims for the return of client assets after that date; and

(ii)in the case of an application under regulation 12B(3), that the administrator will receive claims of persons in relation to a security interest asserted over, or other entitlement to, client assets which are not client money.]

Textual Amendments

[F43Bar date notices—procedural requirementsU.K.

12E.—(1) The persons to whom a bar date notice must be given are—

(a)all clients of whose claim for the return of client assets the administrator is aware;

(b)all persons whom the administrator believes have a right to assert a security interest or other entitlement over the client assets;

(c)the FCA and, where the investment bank is a PRA-authorised person, the PRA; and

(b)in a special administration (bank administration) before the Bank of England has given an Objective A Achievement Notice, the Bank of England.

(2) Paragraph (1) does not apply in relation to any such person whom the administrator has no means of contacting.

(3) A bar date notice—

(a)must be advertised once in the Gazette; and

(b)may be advertised in such other manner as the administrator thinks fit.

(4) In advertising a bar date notice under paragraph (3), the administrator must aim to ensure that the notice comes to the attention of as many persons who are eligible to submit a claim for the return of client assets as the administrator considers practicable.

(5) In this regulation—

“Gazette” means—

(a)

in England and Wales, the London Gazette;

(b)

in Scotland, the Edinburgh Gazette; and

(c)

in Northern Ireland, the Belfast Gazette;

“bar date notice” means a notice under regulation 12A(1) or a hard bar date notice under regulation 12B or 12C; and

“Objective A Achievement Notice” has the meaning given by paragraph 3(3) of Schedule 2.]

Textual Amendments

[F43Costs of making a claimU.K.

12F.—(1) Unless the court orders otherwise, every person who submits a relevant claim bears the cost of making the claim, including costs incurred in providing documents or evidence or responding to requests for further information.

(2) “Relevant claim” means—

(a)a claim for the return of client assets which is submitted in response to the setting of a bar date under regulation 12A, 12B or 12C; or

(b)a claim in relation to a security interest asserted over, or other entitlement to, client assets, which is submitted in response to the setting of a bar date under regulation 12B.]

Textual Amendments

Objective 2 – engaging with market infrastructure bodies and the AuthoritiesU.K.

13.—(1) The administrator shall work with—

(a)a market infrastructure body to—

(i)facilitate the operation of that body's default rules or default arrangements,

(ii)resolve issues arising from the operation of those rules or arrangements, and

(iii)facilitate the [F44transfer,] settlement or prompt cancellation of non-settled market contracts or, as the case may be, of unsettled settlement instructions; and

(b)the Authorities, to facilitate any actions the Authorities propose to take to minimise the disruption of businesses and the markets as a consequence of a special administration order being made in respect of the investment bank.

(2) In paragraph (1), “work with” means to—

(a)comply, as soon as reasonably practicable, with a written request from such a body or from any of the Authorities for the provision of information or the production of documents (in hard copy or in electronic format) relating to the investment bank;

(b)allow that body or any of the Authorities, on reasonable request, access to the facilities, staff and premises of the investment bank for the purposes set out in paragraph (1),

but no action need be taken in accordance with this paragraph to the extent that, in the opinion of the administrator, such action would lead to a material reduction in the value of the property of the investment bank.

(3) In the event that the administrator receives a request under paragraph (2) from a market infrastructure body based overseas, no action needs to be taken in accordance with paragraph (2) if that request conflicts with a request from any of the Authorities.

(4) Where a market infrastructure body has made a request of the type referred to in paragraph (2), that body shall provide the administrator with such information as the administrator may reasonably require in pursuit of Objective 2.

(5) Under this regulation a person or body shall not be required to provide any information—

(a)which they would be entitled to refuse to provide on grounds of legal professional privilege in proceedings in the High Court or on grounds of confidentiality of communications in the Court of Session; or

(b)if such provision by the body holding it would be prohibited by or under any enactment.

(6) In this regulation—

“default arrangements” has the meaning set out in regulation 2(1) of the Financial Markets and Insolvency (Settlement Finality) Regulations 1999 M17; and

“default rules” has the meaning set out in section 188 of the Companies Act 1989 M18.

Textual Amendments

Marginal Citations

M17S.I. 1999/2979 (applied in Northern Ireland by S.I. 2006/50 and S.I. 2007/832); this instrument was amended by S.I. 2006/50.

Continuity of supplyU.K.

14.—(1) This regulation applies where, before the commencement of special administration, the investment bank had entered into arrangements with a supplier for the provision of a supply to the investment bank.

(2) After the commencement of special administration, the supplier—

(a)shall not terminate a supply unless—

(i)any charges in respect of the supply, being charges for a supply given after the commencement of special administration, remain unpaid for more than 28 days,

(ii)the administrator consents to the termination, or

(iii)the supplier has the permission of the court, which may be given if the supplier can show that the continued provision of the supply shall cause the supplier to suffer hardship; and

(b)shall not make it a condition of a supply, or do anything which has the effect of making it a condition of the giving of a supply, that any outstanding charges in respect of the supply, being charges for a supply given before the commencement of special administration, are paid.

(3) Where, before the commencement of special administration, a contractual right to terminate a supply has arisen but has not been exercised, then, for the purposes of this regulation, the commencement of special administration shall cause that right to lapse and the supply shall only be terminated if a ground in paragraph (2)(a) applies.

(4) Any provision in a contract between the investment bank and the supplier that purports to terminate the agreement if any action is taken to put the investment bank into special administration is void.

(5) Any expenses incurred by the investment bank on the provision of a supply after the commencement of special administration are to be treated as necessary disbursements in the course of the special administration.

(6) In this regulation—

“accredited network provider” means a person accredited with a relevant system who operates a secure data network through which the investment bank communicates with the relevant system;

“commencement of special administration” means the making of the special administration order;

“relevant system” has the meaning set out in regulation 2(1) of the Uncertificated Securities Regulations 2001 M19;

“sponsoring system participant” has the meaning set out in regulation 3 of the Uncertificated Securities Regulations 2001 (in the definition of “system participant”);

“supplier” means the person controlling the provision of a supply to the investment bank under a licence, sub-licence or other arrangement, and includes a company that is a group undertaking (within the meaning of section 1161(5) of the Companies Act 2006) in respect of the investment bank, but does not include market infrastructure bodies; and

“supply” means a supply of—

(za)

[F45services relating to the safeguarding or administration of client assets;]

(a)

computer hardware or software or other hardware used by the investment bank in connection with the trading of securities or derivatives;

(b)

financial data;

(c)

infrastructure permitting electronic communication services;

(d)

data processing;

(e)

secure data networks provided by an accredited network provider; or

(f)

access to a relevant system by a sponsoring system participant,

but does not include any services provided for in the contract between the investment bank and the supplier beyond the provision of the supply.

Textual Amendments

Marginal Citations

General powers, duties and effectU.K.

15.—(1) Without prejudice to any specific powers conferred on an administrator by these Regulations, an administrator may do anything necessary or expedient for the pursuit of the special administration objectives.

(2) The administrator is an officer of the court.

(3) The following provisions of this regulation provide for —

(a)general powers and duties of administrators (by application of provisions about administrators in Schedule B1 administration); and

(b)the general process and effect of special administration (by application of provisions about Schedule B1 administration).

(4) The provisions of Schedule B1 and other provisions of the Insolvency Act set out in the Tables apply in relation to special administration as in relation to other insolvency proceedings with the modifications set out—

(a)in paragraph (5) (in respect of the provisions listed in Table 1);

(b)in paragraph (6) (in respect of the provisions listed in Table 2),

and any other modification specified in the Tables.

(5) The modifications in respect of the provisions referred to in Table 1 are that—

(a)a reference to the administrator is a reference to the administrator appointed under a special administration order;

(b)a reference to administration is a reference to special administration;

(c)a reference to an administration order is a reference to a special administration order;

(d)a reference to a company is a reference to an investment bank;

(e)a reference to the purpose of administration is a reference to the special administration objectives; and

(f)a reference to a provision of the Insolvency Act is a reference to that provision as applied by this regulation.

(6) The modifications in respect of the provisions referred to in Table 2 are that—

(a)a reference to the liquidator is a reference to the administrator appointed under a special administration order;

(b)a reference to winding up is a reference to special administration;

(c)a reference to winding up by the court is a reference to the imposition of special administration by order of the court;

(d)a reference to being wound up under Part 4 or 5 of the Insolvency Act is a reference to an investment bank being in special administration;

(e)a reference to the commencement of winding up is a reference to the commencement of special administration;

(f)a reference to going into liquidation is a reference to entering special administration;

(g)a reference to liquidation or to insolvent liquidation is a reference to special administration;

(h)a reference to a winding up order is a reference to a special administration order;

(i)[F46except where otherwise specified in Table 2,] a reference to a company is a reference to an investment bank; and

(j)a reference to a provision of the Insolvency Act is a reference to that provision as applied by this regulation.

[F47(7) In the Tables “Schedule 9 to the 2015 Act” means Schedule 9 to the Small Business, Enterprise and Employment Act 2015 (further amendments relating to the abolition of requirements to hold meetings: company insolvency).]

Table 1: Applied provisions: Schedule B1

Schedule B1SubjectModification or comment
Para 40(1)(a)Dismissal of pending winding up petition
Para 42Moratorium on insolvency proceedings

Sub-paragraphs (4)(a) and (4)(aa) are not applied.

Para 43Moratorium on other legal processes
Para 44(1) and (5)Interim moratorium
Para 45Publicity
Para 46Announcement of administrator's appointment

(a) In sub-paragraph (3)(a), in addition to obtaining the list of creditors, the administrator shall also obtain as complete a list as possible of the clients of the investment bank.

(b) In sub-paragraph (3)(b), the administrator shall send a notice of their appointment to each client of whose claim and address the administrator is aware.

(c) Where the special administration application has not been made by the [F48FCA], notice of the administrator's appointment shall also be sent under sub-paragraph (5) to the [F48FCA].

[F49(ca) Where the special administration application relates to a PRA-authorised person and has not been made by the PRA, notice of the administrator’s appointment shall also be sent under sub-paragraph (5) to the PRA.]

(d) Sub-paragraphs (6)(b) and (c) are not applied.

Para 47Statement of company's affairsIn sub-paragraph (2), the statement must also include particulars (to the extent prescribed) of the client assets held by the investment bank.
Para 48Statement of company's affairs
Para 49Statement of proposals

Paragraphs 49(1) to (3), 51, 53, 54 and 55 do not apply where the [F50FCA or, where relevant, the PRA] gives a direction under regulation 16 and the direction has not been withdrawn: see regulations 16 - 19.

Para 49

(a) Sub-paragraph (2)(b) is not applied.

[F51(aa) Ignore the amendment made by paragraph 10(2) of Schedule 9 to the 2015 Act.]

(b) Under sub-paragraph (4), the administrator shall also send a copy of the statement of proposals to—

(i) every client of whose claim the administrator is aware and has a means of contacting; and

(ii) the [F52FCA and, where the investment bank concerned is a PRA-authorised person, the PRA].

(c) The administrator shall also give notice in the prescribed manner that the statement of proposals is to be provided free of charge to a market infrastructure body who applies in writing to a specified address.

Para 50Creditors' meeting

[F53(za) Ignore the repeal of Para 50 by paragraph 10(3) of Schedule 9 to the 2015 Act.]

(a) In sub-paragraph (1), the administrator shall also summon the clients referred to in paragraph 49(4) to the meeting of creditors and such clients shall be given the prescribed period of notice under sub-paragraph (1)(b).

(b) The [F52FCA and, where the investment bank concerned is a PRA-authorised person, the PRA] may appoint a person to attend a meeting of creditors and make representations as to any matter for decision.

Para 51Requirement for initial creditors' meeting

[F54(za) Ignore the amendments made by paragraph 10(4) and (5) of Schedule 9 to the 2015 Act.]

(a) Each copy of an administrator's proposals sent to a client under paragraph 49 shall be accompanied by an invitation to the initial creditors' meeting.

(b) The administrator's proposals sent to the [F52FCA and, where the investment bank concerned is a PRA-authorised person, the PRA] must also be accompanied by an invitation to the initial creditors' meeting.

Para 53Business and result of initial creditors' meeting

[F55(za) Ignore the amendments made by paragraph 10(8) to (10) of Schedule 9 to the 2015 Act.]

(a) Insolvency rules shall prescribe how clients shall vote at meetings of creditors.

(b) Under sub-paragraph (2), if the [F56FCA] has not appointed a person to attend the meeting, the administrator must also report any decision taken to the [F56FCA].

[F57(c) If the investment bank concerned is a PRA-authorised person, and if the PRA has not appointed a person to attend the meeting under sub-paragraph (2), the administrator must also report any decision taken to the PRA.]

Para 54Revision of administrator's proposals

[F58(za) Ignore the amendments made by paragraph 10(11) to (16) of Schedule 9 to the 2015 Act.]

(a) If the revision proposed by the administrator affects both creditors and clients, then every reference in paragraph 54 to creditors includes clients.

(b) If the administrator thinks that the revision proposed only affects either creditors or clients, then this paragraph only applies to the affected party, however the party not affected must be informed of the revision in a manner prescribed in insolvency rules.

(c) The [F52FCA and, where the investment bank concerned is a PRA-authorised person, the PRA] must be invited to the creditors' meeting mentioned in sub-paragraph (2)(a).

(d) The statement of the proposed revision mentioned in sub-paragraph (2)(b) must also be sent to the [F52FCA and, where the investment bank concerned is a PRA-authorised person, the PRA].

Para 55Failure to obtain approval of administrator's proposals

[F59(za) Ignore the amendment made by paragraph 10(17) of Schedule 9 to the 2015 Act.]

(a) In making an order under sub-paragraph (2) the court must have regard to the special administration objectives.

(b) Sub-paragraph (2)(d) is not applied.

Para 56Further creditors' meetings

[F60(a) Ignore the amendments made by paragraph 10(18) to (20) of Schedule 9 to the 2015 Act.]

[F61(b)] The [F52FCA and, where the investment bank concerned is a PRA-authorised person, the PRA] must be invited to any meeting summoned under this paragraph.

Para 57Creditors' committee

[F62(za) Ignore the amendment made by paragraph 10(21) of Schedule 9 to the 2015 Act.]

(a) A creditors' committee can only be established by a creditors' meeting to which creditors and clients have both been given notice.

(b) The [F52FCA and, where the investment bank concerned is a PRA-authorised person, the PRA] may appoint a person to attend a meeting of the creditors' committee and make representations as to any matter for decision.

(c) Insolvency rules shall ensure that, where a meeting of creditors resolves to establish a creditors' committee, the makeup of the creditors' committee is a reflection of all parties with an interest in the achievement of the special administration objectives.

Para 58Correspondence instead of creditors' meeting [F63Para 58 applies as it applied before its repeal by paragraph 10(22) of Schedule 9 to the 2015 Act.]
Para 59Functions of an administrator
Para 60 (and Schedule 1 to the Insolvency Act)General powersCertain powers in Schedule 4 of the Insolvency Act are also applied (see Table 2).
Para 61Directors
Para 62Power to call meetings

[F64(a) Ignore the amendment made by paragraph 10(23) of Schedule 9 to the 2015 Act.]

[F65(b)] The administrator may also call a meeting of clients or contributories.

Para 63Application to court for directions
Para 64Management powers
Para 65Distribution to creditors

Sub-paragraph (3) is not applied [F66in England and Wales].

Para 66Payments
Para 67Property
Para 68Management

In this paragraph, references to proposals approved under paragraphs 53 or 54 include—

(a) proposals agreed with the [F67FCA or, where relevant, the PRA] under regulations 17 or 18; or

(b) proposals in respect of which the court has made an order dispensing with the need for agreement in accordance with those regulations,

without need for approval.

Para 69Agency
Para 70Floating charge
Para 71Fixed charge
Para 72Hire purchase property
Para 73Protection for secured or preferential creditorsSub-paragraph (2)(d) is not applied.
Para 74Challenge to administrator's conduct

[F68(za) Ignore the amendment made by paragraph 10(24) of Schedule 9 to the 2015 Act.]

(a) The [F52FCA and, where the investment bank concerned is a PRA-authorised person, the PRA] may also make an application under this paragraph on the grounds that—

(i) the administrator is acting or has acted so as unfairly to harm the interests of some or all of the members, creditors or clients; or

(ii) the administrator is proposing to act in a way which would unfairly harm the interests of some or all of the members, creditors or clients.

(b) A client may also make an application under sub-paragraph (1) or (2).

(c) Where the [F69FCA or the PRA] has given a direction under regulation 16 which has not been withdrawn, an order may not be made under this paragraph if it would impede or prevent compliance with the direction.

(d) Any of the following persons may make an application under this paragraph on the grounds that the administrator is not taking any action in response to a request from that person under regulation 13(2) and that the person is of the opinion that the action requested would not lead to a material reduction in the value of the property of the investment bank—

(i) the Bank of England,

(ii) the Treasury,

(iii) the [F69FCA or the PRA], or

(iv) a market infrastructure body.

(e) [F70FSCS may make an application under this paragraph on the grounds that the administrator is not performing the duties set out in regulation 10A as quickly or as efficiently as is reasonably practicable.

(f) Any of the following persons may make an application under this paragraph on the grounds that the administrator has made, or proposes to make, a partial property transfer (within the meaning given in regulation 10B(13)) (“relevant transfer”) in contravention of regulation 10E, 10F or 10G—

(i) the Bank of England;

(ii) the FCA;

(iii) where the investment bank is a PRA-authorised person, the PRA.

(g) Any person, other than the investment bank, who is party to an arrangement of a kind referred to in regulation 10E(1) or 10F(1) may make an application under this paragraph on the grounds that the administrator has made, or proposes to make, a relevant transfer in contravention of that regulation.

(h) A recognised investment exchange, a recognised clearing house [F71, a recognised CSD] or any person, other than the investment bank, who is party to a market contract may make an application under this paragraph on the grounds that the administrator has made, or proposes to make, a relevant transfer in contravention of regulation 10G.

(i) Where an application is made under this paragraph on the grounds that the administrator has made a relevant transfer in contravention of regulation 10G—

(i) sub-paragraphs (3)(a), (d) and (e) and (4) are not applied;

(ii) the court may make an order declaring that the transfer was made in contravention of the regulation concerned.

(j) Where an application is made under this paragraph on the grounds that the administrator has made a relevant transfer in contravention of regulation 10E or 10F, the court may make such order as it thinks fit for restoring the position to what it would have been if the transfer had been made in contravention of the regulation concerned.

(k) The FCA and, where the investment bank is a PRA-authorised person, the PRA may make an application under this paragraph on the grounds that the administrator has failed to carry out a client money reconciliation in accordance with regulation 10H(2) or to transfer an amount in accordance with regulation 10H(3) or (4).]

Para 75MisfeasanceA client and the [F52FCA and, where the investment bank concerned is a PRA-authorised person, the PRA] shall be included in the list of persons who may make an application under sub-paragraph (2).
Para 79Court ending administration on application of administrator

Sub-paragraph (2) is not applied.

See regulation 20

Para 81Court ending administration on application of a creditorThis paragraph is not applied where the administrator was appointed by the court on the application of the [F69FCA or the PRA] or the Secretary of State.
Para 84Termination: no more assets for distribution

(a) The administrator shall only send a notice under sub-paragraph (1) if the investment bank no longer holds client assets.

[F72(aa) Ignore the amendment made by paragraph 10(33) of Schedule 9 to the 2015 Act.]

(b) In sub-paragraph (5), a copy of the notice should also be sent to every client of the investment bank of whom the administrator is aware and the [F52FCA and, where the investment bank concerned is a PRA-authorised person, the PRA].

See regulation 21

Para 85Discharge of administration order
Para 86Notice to Companies Registrar at the end of administration
Para 87Resignation

(a) Where the administrator was appointed by the court on the application of the [F69FCA or the PRA] or the Secretary of State, the notice of the resignation given in accordance with sub-paragraph (2)(a) must be also given to the applicant.

(b) Sub-paragraphs (2)(b) to (d) are not applied.

Para 88Removal
Para 89Disqualification

(a) Where the administrator was appointed by the court on the application of the [F69FCA or the PRA] or the Secretary of State, the notice given in accordance with sub-paragraph (2)(a) must be also given to the applicant.

(b) Sub-paragraphs (2)(b) to (d) are not applied.

Para 90ReplacementThe reference to paragraphs 91 to 95 is to paragraph 91.
Para 91Replacement

The [F52FCA and, where the investment bank concerned is a PRA-authorised person, the PRA] is added to the list of persons who may make an application to appoint an administrator but to whom the restrictions in sub-paragraph (2) apply.

Para 98Discharge

[F73(a) Ignore the amendment made by paragraph 10(38) of Schedule 9 to the 2015 Act.]

[F74(b)] Sub-paragraphs (2)(b) [F75and (ba)] and (3) are not applied.

Para 99Vacation of office: charges and liabilities

(a) In sub-paragraph (3), the former administrator's remuneration and expenses incurred in respect of the pursuit of Objective 1 will be charged on and payable out of the client assets.

(b) In sub-paragraph (4)(b), the reference to any charge arising under sub-paragraph (3) does not include a charge on client assets.

Para 100Joint administrators
Para 101Joint administratorsIn sub-paragraph (3), the reference to paragraphs 87 to 99 is to paragraphs 87 to 91 and 98 to 99.
Para 102Joint administrators
Para 103Joint administrators

(a) In sub-paragraph (2), the reference to paragraph 12(1)(a) to (e) is to regulation 5(1).

(b) Sub-paragraphs (3) to (5) are not applied.

Para 104Presumption of validity
Para 105Majority decision of directors
Para 106 (and section 430 of and Schedule 10 to the Insolvency Act)Fines

[F76(a) Ignore the amendments made by paragraph 11 of Schedule 9 to the 2015 Act.]

[F77(b)] Sub-paragraphs (2)(a), (2)(b) and (2)(l) to (2)(n) are not applied.

Para 107Extension of time limitIn considering an application under paragraph 107, the court must have regard to the special administration objectives.
Para 108Extension of time limit

[F78(za) Ignore the amendments of Para 108 made by paragraph 10(39), (40), (42) and (43) of Schedule 9 to the 2015 Act.]

(a) To obtain consent under this paragraph, the administrator must also obtain consent of those clients whose claims amount to more than 50% of the total amount of claims for client assets, disregarding the claims of those clients who were sent a copy of the statement of proposals but who did not respond to an invitation to give or withhold consent.

(b) Sub-paragraph (3) is not applied.

Para 109Extension of time limit
Para 111Interpretation

[F79(a) Ignore the amendment made by paragraph 10(44) of Schedule 9 to the 2015 Act.]

[F80(b)] The definition of “administrator” and sub-paragraph (1A)(b) and (c) and sub-paragraph (1B) are not applied.

Paras 112- 116Scotland

Table 2: Applied provisions: other provisions of the Insolvency Act M20

Insolvency ActSubjectModification or comment

Sections 74 and 76- 83

Contributories
Section 167 (and Schedule 4)Powers of the liquidator

(a) In [F81subsection (2) the reference] to “liquidation committee” is to “creditors' committee”.

(b) A client may also apply to the court under subsection (3).

(c) In Schedule 4, paragraphs 4 to 10 and 12 shall not apply, and in paragraph 13, the reference to “winding up the company's affairs and distributing its assets” is to “pursuing the special administration objectives”.

Section 168(4)Discretion in managing and distributing assets
Section 176Preferential charges on goods distrained
[F82Section 176ZB Application of proceeds of office-holder claims]
Section 176AUnsecured creditors
Section 178Disclaimer of onerous property
Section 179Disclaimer of leaseholds
Section 180Land subject to rent charge
Section 181Disclaimer: powers of court
Section 182Powers of court (leaseholds)
Section 183Effect of execution or attachment (England and Wales)Subsection (2)(a) is not applied.
Section 184Duties of officersIn subsection (1), ignore the reference to a resolution having been passed for voluntary winding up.
Section 185Effect of diligence (Scotland)In the application of section 37(1) of the Bankruptcy (Scotland) Act 1985 (c. 66), the reference to an order of the court awarding winding up is a reference to the making of the special administration order.
Section 186Rescission of contracts by the court
Section 187Power to make over assets to employees
Section 193Unclaimed dividends (Scotland)
Section 194Resolutions passed at adjourned meetings [F83Section 194 applies as it applied before its repeal by paragraph 46 of Schedule 9 to the 2015 Act.]
Section 196Judicial notice of court documents
Section 197Commission for receiving evidence
Section 198Court order for examination of persons in Scotland
Section 199Costs of application for leave to proceed (Scottish companies)
Section 206Fraud in anticipation of winding upIn subsection (1), omit the reference to passing a resolution for voluntary winding up.
Section 207Transactions in fraud of creditorsIn subsection (1), omit the reference to passing a resolution for voluntary winding up.
Section 208Misconduct in course of winding up

[F84(a)] In subsection (1), omit “whether by the court or voluntarily”.

[F84(b) Ignore the amendment made by paragraph 52 of Schedule 9 to the 2015 Act.]

Section 209Falsification of company's books
Section 210Material omissions from statement

(a) In subsection (1) omit “whether by the court or voluntarily”.

(b) In subsection (2), omit “or has passed a resolution for voluntary winding up”.

Section 211False representation to creditors

In subsection (1)—

(a) omit “whether by the court or voluntarily”; and

(b) a reference to the company's creditors includes a reference to clients of the investment bank.

Section 212Summary remedy
Section 213Fraudulent trading
Section 214Wrongful trading

Subsection (6) is not applied.

Section 215Proceedings under section 213 or 214
Section 216Restriction on re-use of company names

(a) The reference to “liquidating company” shall be to “company in special administration”.

(b) Subsections (7) and (8) are not applied.

Section 217Personal liability for debts following contravention of section 216Subsection (6) is not applied.
Section 218Prosecution of delinquent officers and members of company

(a) In subsection (3), ignore the first reference to the official receiver and treat the second reference as a reference to the Secretary of State.

(b) In subsection (5) treat the reference to subsection (4) as a reference to subsection (3).

(c) Subsections (4) and (6) are not applied.

Section 219Obligations arising under section 218Treat the reference to section 218(4) in subsection (1) as a reference to section 218(3).
Section 233Utilities
[F85Section 233A Further protection of utilities]
Section 234Getting in the company's property

(a) Subsection (1) is not applied.

(b) “Office holder” means the administrator.

Section 235Co-operation with the administrator

(a) Subsections (1) and (4)(b) to (d) are not applied.

(b) “Office holder” means the administrator.

Section 236Inquiry into company's dealings

(a) Subsection (1) is not applied.

(b) “Office holder” means the administrator.

Section 237Enforcement by the court
Section 238Transactions at an undervalue (England and Wales)
Section 239Preferences (England and Wales)
Section 240Sections 238 and 239: relevant time

(a) In subsection (2)(a), the reference to being unable to pay its debts has the meaning given by regulation 2.

(b) Sub-paragraphs (1)(d) and (3)(a) to (d) are not applied.

Section 241Orders under sections 238 and 239Subsections (3A) and (3B) are not applied.
Section 242Gratuitous alienations (Scotland)
Section 243Unfair preferences (Scotland)
Section 244Extortionate credit transactions
Section 245Avoidance of floating charges

(a) In subsection (3)(c), the reference to—

(i) administration application is to be read as an application for special administration, and

(ii) administration order is to a special administration order.

(b) In subsection (4)(a) and (b),the reference to being unable to pay its debts has the meaning given by regulation 2.

(c) Subsections (3)(d) and (5)(a) to (c) are not applied.

Section 246Unenforceability of liens

(a) Subsection (1) is not applied.

(b) “Office holder” means the administrator.

[F86Section 246ZD Power to assign certain causes of action

(a) Subsection (1) is not applied.

(b) “Office holder” means the administrator.]

Section 246ARemote attendance at meetings

[F87(a) Ignore the amendments made by paragraph 54 of Schedule 9 to the 2015 Act.]

[F88(b)] Treat every reference to creditors as including clients.

Section 246BUse of websites
Section 386 (and Schedule 6 as read with Schedule 4 to the Pensions Schemes Act 1993)Preferential debts
Section 387, subsections (1) and (3A).“The relevant date”Treat the reference to “administration” as a reference to special administration.
Section 389Offence of acting without being qualified

(a) Treat the reference to acting as an insolvency practitioner as a reference to acting as the administrator.

(b) [F89Subsection (2) is not applied.]

[F90Sections 390 to 391T Authorisation and regulation of insolvency practitioners

(a) In section 390 treat references to acting as an insolvency practitioner as references to acting as the administrator.

(b) Read subsection (2) of that section (as so modified) as if after “authorised” there were inserted “to act as an insolvency practitioner”.

(c) An order under section 391 has effect in relation to any provision applied for the purposes of special administration.

(d) In sections 390A, 390B(1) and (3), 391O(1)(b) and 391R(3)(b), in a reference to authorisation or permission to act as an insolvency practitioner in relation to (or only in relation to) companies the reference to companies has effect without the modification in paragraph (6)(i) of this regulation.

(e) In sections 391Q(2)(b) and 391S(3)(e) the reference to a company has effect without the modification in paragraph (6)(i) of this regulation.]

Section 411Insolvency rules

The reference in subsections (1A), (2C) and (3) to Part 2 of the Banking Act 2009 includes a reference to these Regulations.

Section 414Fees orders

(a) The reference in subsection (1) to “Parts I to VII of this Act” includes these Regulations.

(b) Ignore the reference to the official receiver.

Section 423Transactions defrauding creditors

Subsection (4) is not applied.

Sections 424 and 425Transactions defrauding creditors
Section 426Co-operation between courtsReferences to “insolvency law” includes provisions made by or under these Regulations.
Sections 430 and 431 (and Schedule 10)Offences
Section 432Offences by bodies corporateIn subsection (4) ignore all the provisions of the Insolvency Act listed there except for sections 206 to 211.
Section 433Statements: admissibilityIn subsection (1)(a), a statement of affairs prepared “for the purposes of any provision of this Act” includes any statement made for the purposes of a provision of that Act as applied by these Regulations.
Sections 434B – 434DSupplementary provisions [F91Ignore the amendments of section 434B made by paragraph 57 of Schedule 9 to the 2015 Act.]

Textual Amendments

Marginal Citations

M20Relevant amendments to the provisions of the Insolvency Act included in Table 2 are as follows: sections 74, 76 to 78, 80 and 83 were amended by S.I. 2009/1941; section 176A was inserted by the Enterprise Act 2002, section 252 and amended by S.I. 2008/948; sections 183 and 184 were amended by the Courts Act 2003 (c. 39), section 109(1), Schedule 8, paragraphs 295 and 296 and section 184 was amended by S.I. 1986/1996; section 185 was amended by the Bankruptcy and Diligence etc. (Scotland) Act 2007 (asp 3), section 226, Schedule 5, paragraph 14; section 187 was amended by S.I. 2007/2194 and by S.I. 2009/1941; section 193 was amended by S.I. 2009/1941; section 196 was amended by S.I. 2009/1941; section 206 was amended by S.I. 1986/1996; section 212 was amended by the Enterprise Act 2002, sections 248(3), 278(2), Schedule 17, paragraphs 9 and 18; section 215 was amended by the Civil Partnerships Act 2004 (c. 33), section 261(1), Schedule 27, paragraph 112; sections 218(1)(a) and (b) were inserted by the Insolvency Act 2000 (c. 39), sections 10(1), (2), (5) and section 218(5) was substituted by section 10(1) and (5), and amended by S.I. 2009/1941; section 218(2) was repealed by sections 10(1) and (3), 15(1) and Schedule 5; section 219(2A) and (2B) were inserted by the Insolvency Act 2000, section 11, while section 219(1), (3) and (4) were amended by sections 10(1) and (7) of the Insolvency Act 2000 and by S.I. 2009/1941; section 233 was amended by the Water Act 1989 (c. 15), section 190, Schedule 25, paragraph 78, the Gas Act 1995 (c. 45), section 16(1), Schedule 4, paragraph 14, the Utilities Act 2000 (c. 27), section 108, Schedule 6, paragraph 47, the Insolvency Act 2000, section 1, Schedule 1, paragraphs 1, 8, the Enterprise Act 2002, section 248(3), Schedule 17, paragraphs 9, 22, the Communications Act 2003 (c. 21), section 406(1), Schedule 17, paragraph 82 and by S.I. 2004/1822; sections 234 and 235 were amended by the Enterprise Act 2002, section 248(3), Schedule. 17, paragraphs 9, 23, 24; section 236 was amended by S.I. 2010/18; section 238 was amended by the Enterprise Act 2002, section 248(3), Schedule 17, paragraphs 9, 25; section 240 was amended by the Enterprise Act 2002, sections 248(3), 278(2), Schedule 17, paragraphs 9, 26 and Schedule 26 and by S.I. 2002/1240; section 241 was amended by the Insolvency (No. 2) Act 1994 (c. 12), section 1 and by the Enterprise Act 2002, section 248(3), Schedule 17, paragraphs 9, 27; sections 242 to 246 were amended by the Enterprise Act 2002, sections 248(3), 278(2), Schedule 17, paragraphs 9, 28 to 32 and Schedule 26; sections 246A and 246B were inserted by S.I.2010/18; section 386 was amended by the Pension Schemes Act 1993 (c. 48), section 190, Schedule 8, paragraph 18 and by the Enterprise Act 2002, section 251(3); section 387 was amended by the Enterprise Act 2002, section 248(3), Schedule 17, paragraphs 9, 34; section 389 was amended by the Bankruptcy (Scotland) Act 1993 (c. 6), section 11(2); section 390 was amended by the Adults with Incapacity (Scotland) Act 2000 (asp 4), section 88(2), Schedule 5, paragraph 18, by the Enterprise Act 2002, section 257, Schedule 21, paragraph 4, by the Mental Capacity Act 2005 (c. 9), section 67(1), (2), Schedule 6, paragraph 31, Schedule 7, by the Tribunal Courts and Enforcement Act 2007 (c. 15), section 108(3), Schedule 20, paragraphs 1, 6, by S.I. 2005/ 2078, by S.S.I. 2005/465, by S.I. 2009/3081 and by S.I. 2009/1941; section 411 was amended by the Constitutional Reform Act 2005 (c.4), section 15(1), Schedule 4, paragraphs 185, 188, by the Banking Act 2009, sections 125 and 160, by S.I. 2007/2194 and by S.I. 2009/1941; section 414 was amended by S.I. 2007/2194; section 423 was amended by the Civil Partnerships Act 2004, section 261(1), Schedule 27, paragraph 121; section 424 was amended by the Enterprise Act 2002, section 248(3), Schedule 17, paragraphs 9, 36; section 426 was amended by the Insolvency Act 2000, section 8, Schedule. 4, paragraph 16; by S.I. 1989/2404, S.I. 1989/2405 and by S.I. 2002/3150; section 431 was amended by the Criminal Procedure (Consequential Provisions) (Scotland) Act 1995 (c. 40), section 5, Schedule 4, paragraph 61; section 433 was amended by the Youth Justice and Criminal Evidence Act 1999 (c. 23), section 48, 59, Schedule 3, paragraph 7; sections 434B and 434C were inserted by S.I. 2008/948; and section 434D was inserted by S.I. 2009/1941.

[F92Appropriate regulator] directionU.K.

16.—(1) The [F93appropriate regulator] may direct the administrator to prioritise one or more special administration objectives.

(2) A direction under paragraph (1) may only be given if [F94that regulator] is satisfied that the giving of the direction is necessary, having regard to the public interest in—

(a)the stability of the financial systems of the United Kingdom; or

(b)the maintenance of public confidence in the stability of the financial markets of the United Kingdom.

(3) A direction under paragraph (1) must be given in writing and should set out reasons for giving the direction.

(4) Before giving such a direction the [F95appropriate regulator] must consult the Treasury and the Bank of England.

[F96(4A) Where the investment bank concerned is a PRA-authorised person, the appropriate regulator must also consult the other regulator before giving such a direction.]

(5) If the [F95appropriate regulator] thinks that the circumstances that gave rise to the need for it to give a direction have passed, it shall withdraw its direction.

(6) Paragraphs 49(1) to (3), 51, 53, 54 and 55 of Schedule B1 (as applied by regulation 15) shall not apply where the [F95appropriate regulator] has given a direction under this regulation and the direction has not been withdrawn.

[F97(7) In this regulation, “appropriate regulator” means—

(a)in relation to an investment bank which is a PRA-authorised person, the FCA or the PRA;

(b)in any other case, the FCA.]

Textual Amendments

Administrator's proposals in the event of [F98Appropriate regulator] directionU.K.

17.—(1) Where the [F99FCA or the PRA] has given a direction under regulation 16, the administrator shall make a statement setting out proposals for achieving the special administration objectives in accordance with the F100... direction.

(2) The statement under paragraph (1) must deal with such matters as may be prescribed and may include—

(a)a proposal for a voluntary arrangement under Part 1 of the Insolvency Act (although this regulation is without prejudice to section 4(3) of that Act); or

(b)a proposal for a compromise or arrangement to be sanctioned under Part 26 of the Companies Act 2006 (arrangements and reconstructions).

(3) The statement shall be agreed with [F101the regulator which has given the direction].

(4) If the administrator is unable to agree the statement with [F101the regulator which has given the direction], the administrator may apply to the court for directions under paragraph 63 of Schedule B1 (as applied by regulation 15).

(5) Following an application under sub-paragraph (4), the court may—

(a)make an order dispensing with the need for agreement;

(b)adjourn the hearing conditionally or unconditionally; or

(c)make any other order that the court thinks appropriate.

(6) The court may make an order under sub-paragraph (5)(a) only if it considers that the proposals set out in the statement are reasonably likely to ensure that the administrator acts in accordance with the F102... direction.

(7) Where the court makes an order, the administrator shall as soon as possible send a copy of the order to the registrar of companies.

(8) After—

(a)the statement has been agreed with [F103the regulator which has given the direction]; or

(b)the court has made an order dispensing with the need for agreement,

paragraph 49(4) to (8) of Schedule B1 (as applied by regulation 15) shall then apply to the statement, but the administrator need not send the FSA a copy of the statement of proposals.

(9) Where, before the [F104FCA or the PRA] gives its direction under regulation 16, a meeting of creditors has approved the statement of proposals in accordance with paragraph 53 of Schedule B1 (as applied by regulation 15), that statement of proposals shall be ignored for the purposes of regulation 16, this regulation and paragraph 68 of Schedule B1 (as applied by regulation 15).

Textual Amendments

Revision of proposals in the event of [F105Appropriate regulator] directionU.K.

18.—(1) This regulation applies where—

(a)the administrator's statement of proposals under regulation 17 has been agreed with [F106the regulator which gave the direction under regulation 16] (or the court has made an order dispensing with the need for agreement);

(b)the administrator proposes a revision to the proposals;

(c)the administrator thinks the revision is substantial; and

(d)[F107that regulator] has not withdrawn its direction given under regulation 16.

(2) The administrator shall agree the revised statement with [F107that regulator].

(3) Regulation 17(4) to (7) shall apply where the administrator is unable to agree the revised statement with [F107that regulator].

(4) After the revised statement has been agreed with [F107that regulator] (or the court has made an order dispensing with the need for agreement) the administrator shall send the revised statement to—

(a)every creditor of the investment bank of whose claim and address the administrator is aware;

(b)every client of the investment bank of whose claim the administrator is aware and has a means of contacting;

(c)every member of the investment bank of whose address the administrator is aware.

(5) The administrator shall be taken to have complied with paragraph (4)(c) if the administrator publishes a notice undertaking to provide a copy of the revised statement free of charge to any member of the investment bank who applies in writing to a specified address.

(6) A notice under paragraph (5) shall be published in the prescribed manner and within the prescribed period.

(7) The administrator shall send a copy of the revised statement to—

(a)the court; and

(b)the registrar of companies.

Textual Amendments

[F108Appropriate regulator] direction withdrawnU.K.

19.—(1) This regulation applies if, after the administrator's statement of proposals has been agreed with the [F109regulator which gave the direction under regulation 16] or the court has made an order dispensing with the need for agreement under regulation 17, the F110... direction is then withdrawn.

(2) If the administrator proposes a revision to the statement of proposals and the administrator thinks that the proposed revision is substantial, then paragraphs 54 and 55 of Schedule B1 (as applied by regulation 15) apply.

Textual Amendments

[F111Responsibility for certain costs of the administrationU.K.

19A.—(1) Where the administrator considers that relevant costs have been incurred in consequence of a failure by the investment bank to comply with client money rules or with any relevant requirement (“a default”), the administrator—

(a)must seek the agreement of the creditors’ committee established under paragraph 57 of Schedule B1 (as applied by regulation 15) to the amount incurred in consequence of the default; or

(b)if there is no creditors’ committee or the administrator is unable to agree that amount with the creditors’ committee, must apply to the court for an order fixing the amount.

(2) On an application under paragraph (1)(b), the court may fix the amount incurred in consequence of the default or dismiss the application on the ground that there was no default or that no relevant costs have been incurred in consequence of the default.

(3) Paragraph (4) applies where the creditors’ committee agree an amount incurred in consequence of the default or the court fixes an amount by order.

(4) Notwithstanding any provision in insolvency rules prescribing how the expenses of the special administration are to be paid, responsibility for the relevant amount is assigned to the investment bank, and accordingly that amount is to be paid out of the investment bank’s assets.

(5) Where the investment bank’s assets are insufficient to enable the relevant amount to be met out of those assets, paragraph (4) has effect only in relation to that part of the relevant amount which can be met out of those assets.

(6) In this regulation—

“relevant amount” means the amount of relevant costs incurred in consequence of the default as agreed by the creditors’ committee or fixed by the court;

“relevant costs” means costs incurred by the administrator of applying the procedure set out in Schedule B1 (as applied by regulation 15 and as prescribed) for ascertaining particulars of the client assets held by the investment bank, and of taking custody and control and distributing those assets; and

“relevant requirement” means any requirement relating to holding client assets contained in—

(a)

rules made under Part 9A of FSMA (rules and guidance) which make provision relating to the handling of client assets, other than client money, held by a person who is authorised for the purposes of FSMA;

(b)

Commission Delegated Regulation (EU) No. 231/2013 of 19th December 2012 supplementing Directive 2011/61/EU of the European Parliament and of the Council with regard to exemptions, general operating conditions, depositaries, leverage, transparency and supervision; or

(c)

Commission Delegated Regulation (EU) 2016/438 of 17th December 2015 supplementing Directive 2009/65/EC of the European Parliament and of the Council with regard to obligations of depositaries.]

Textual Amendments

Successful rescueU.K.

20.—(1) This regulation applies if the administrator has pursued the first part of Objective 3 (as set out in regulation 10(1)(c)(i)) and thinks that it has been sufficiently achieved.

(2) The administrator shall make an application under paragraph 79 of Schedule B1 (as applied by regulation 15).

(3) An administrator who makes an application in accordance with paragraph (2) must send a copy to the [F112FCA and, where the investment bank concerned is a PRA-authorised person, the PRA].

Textual Amendments

Dissolution or voluntary arrangementU.K.

21.—(1) This section applies if—

(a)the administrator believes that Objectives 1 and 2 have been sufficiently achieved, and

(b)the administrator pursues the second part of Objective 3 (as set out in regulation 10(1)(c)(ii)).

(2) The administrator may—

(a)give a notice which is to be treated as a notice under paragraph 84 of Schedule B1 (as applied by regulation 15); or

(b)make a proposal in accordance with Part 1 of the Insolvency Act (company voluntary arrangement).

(3) Part 1 of the Insolvency Act shall apply to a proposal made by an administrator with the following modifications.

(4) In section 3 (summoning of meetings), subsection (2) (and not (1)) applies.

(5) The action that may be taken by a court under section 5(3) M21 (effect of approval) includes suspension of the special administration order.

[F113(5A) Sections 2 to 6 and 7 F114... have effect without the amendments of those provisions made by paragraphs 2 to [F1158] of Schedule 9 to the Small Business, Enterprise and Employment Act 2015 (further amendments relating to the abolition of requirements to hold meetings: company voluntary arrangements).]

(6) On the termination of a company voluntary arrangement the administrator may apply to the court to lift the suspension of the special administration order.

(7) For the purposes of this regulation, references in Part 1 of the Insolvency Act to “administration” include special administration.

Textual Amendments

F114Words in reg. 21(5A) omitted (26.6.2020) by virtue of Corporate Insolvency and Governance Act 2020 (c. 12), s. 49(1), Sch. 3 para. 47(a) (with ss. 2(2), 5(2))

Marginal Citations

M21Section 5(3) was amended by the Enterprise Act 2002, section 248(3), Schedule 17, paragraphs 9, 11(a) and (b) and by the Insolvency Act 2000 (c.39), section 2(a), Schedule 2, Part 1, paragraphs 1, 6(b), section 15(1), Schedule 5.

Special administration order as an alternative orderU.K.

22.—(1) On a petition for a winding up order [F116,] an application for an administration order [F117or an order under regulation 8 of the Payment and Electronic Money Institution Insolvency Regulations 2021] in respect of an investment bank the court may instead make a special administration order.

(2) Paragraph (1) is subject to regulation 3.

(3) A special administration order may be made under paragraph (1) only on the application of the [F118FCA or, where the investment bank concerned is a PRA-authorised person, the PRA].

Textual Amendments

Disqualification of directorsU.K.

23.—(1) In the Disqualification Act—

(a)a reference to liquidation includes a reference to special administration;

(b)a reference to the winding up of a company includes a reference to an investment bank being subject to a special administration order;

(c)a reference to becoming insolvent includes a reference to becoming subject to a special administration order; and

(d)a reference to a liquidator includes a reference to an administrator.

(2) Section 6(2) is not applied.

[F119(3)  For the purposes of the application of section 7A of the Disqualification Act (office-holder’s report on conduct of directors) to an investment bank which is in special administration—

(a)the “office-holder” is the administrator;

(b)the “insolvency date” means the date on which the special administration order is made; and

(c)subsections (9) to (11) are omitted.]

(4) In section 21 of the Disqualification Act M22 (interaction with the Insolvency Act), the references to the provisions of the Insolvency Act include those provisions as applied by these Regulations.

Textual Amendments

Marginal Citations

M22Section 21 was amended by the Companies Act 1989, section 212, Schedule 24, the Insolvency Act 2000, section 8, Schedule 4, paragraphs 1, 14(1) to (3)(a) and S.I. 2009/1941.

Limited liability partnershipsU.K.

24.  Where an investment bank is formed as a limited liability partnership, Schedule 3 (application of these Regulations to limited liability partnerships) has effect.

PartnershipsU.K.

25.—(1) Where an investment bank is formed as a partnership, Schedule 4 (application of these Regulations to partnerships) has effect.

(2) This regulation does not apply to investment banks formed as a partnership constituted under the law of Scotland.

Northern Irish equivalent enactmentsU.K.

26.—(1) In the application of these Regulations to Northern Ireland, a reference to an enactment is to be treated as a reference to the equivalent enactment having effect in relation to Northern Ireland (“equivalent Northern Ireland enactment”).

(2) The table in Schedule 5 shows the enactments referred to in these Regulations together with the equivalent Northern Ireland enactments.

(3) Where these Regulations provide for an enactment to apply with an amendment or modification, the equivalent Northern Ireland enactment is to apply with an equivalent amendment or modification (with any necessary modification being made and subject to what is said in relation to that enactment in the third column of the table in Schedule 5).

Modifications and consequential amendments to legislationU.K.

27.  Schedule 6 (modifications and consequential amendments) applies as follows—

(a)Parts 1 and 2 apply in relation to a case where an investment bank which is a company is in special administration; and

(b)Part 3 makes amendments to legislation in consequence of these Regulations.

Brooks Newmark

Angela Watkinson

Two of the Lords Commissioners of Her Majesty's Treasury

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