3.—(1) A partial property transfer to which this Order applies may not provide for the transfer of some, but not all, of the protected rights and liabilities between a particular person (“P”) and a recognised central counterparty.
(2) A partial property transfer to which this Order applies may not include provision under the continuity powers which terminates or modifies the protected rights or liabilities between P and a recognised central counterparty.
(3) For the purposes of paragraphs (1) and (2), rights and liabilities between P and a recognised central counterparty are protected if either paragraph (4) or paragraph (5) applies.
(4) This paragraph applies where—
(a)the recognised central counterparty has established a separate default fund for a particular class or classes of financial instruments in accordance with Article 42(4) of the EMIR Regulation; and
(b)the rights and liabilities—
(i)are recorded in the accounts of the recognised central counterparty as positions in the class or classes financial instruments referred to in sub-paragraph (a) or as assets held to cover those positions; or
(ii)arise out of the clearing members’ contributions to the separate default fund referred to in sub-paragraph (a).
(5) This paragraph applies where—
(a)the recognised central counterparty has established a single default fund in accordance with Article 42 of the EMIR regulation; and
(b)the rights and liabilities—
(i)are recorded in the accounts of the recognised central counterparty; or
(ii)arise out of the clearing members’ contributions to the single default fund referred to in sub-paragraph (a).
(6) For the purposes of paragraph (1), a property transfer instrument which purports to transfer all of the protected rights and liabilities between P and a recognised central counterparty shall be treated as having done so effectively (and so not give rise to a contravention of paragraph (1)), notwithstanding the possibility that any of the protected rights or liabilities are foreign property and may not have effectively been transferred by the property transfer instrument or by virtue of steps taken under section 39 of the Act.
(7) In this article—
(a)“clearing member” has the meaning given by Article 2(14) of the EMIR Regulation;
(b)“EMIR Regulation” means Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories(1).
4. A partial property transfer to which this Order applies may not transfer property, rights or liabilities or include provision under the continuity powers to the extent that to do so would contravene EU law.
5.—(1) Paragraph (2) applies where an arrangement has been entered into under which one party owes a liability to the other and that liability is secured against property or rights; and it is immaterial that—
(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 not owned by the person who owes the liability.
(2) A partial property transfer to which this Order applies may not—
(a)transfer the property or rights against which the liability is secured unless that liability and the benefit of the security are also transferred;
(b)transfer the benefit of the security unless the liability which is secured is also transferred;
(c)transfer the liability unless the benefit of the security is also transferred;
(d)include provision under the continuity powers which terminates or modifies the arrangement if the effect of that provision is to provide that the liability is no longer secured against the property or rights.
(3) For the purposes of paragraph (2), a property transfer instrument which purports to transfer any property, rights or liabilities shall be treated as having done so effectively (and so not give rise to a contravention of paragraph (2)), notwithstanding the possibility that any of the property, rights or liabilities are foreign property and may not have been effectively transferred by the property transfer instrument or by virtue of steps taken under section 39 of the Act.
(4) Paragraph (2) does not apply if the arrangement has been entered into by the recognised central counterparty in contravention of any requirement set out in regulations made pursuant to section 286(1) of the Financial Services and Markets Act 2000(2) or any rules made pursuant to section 286(4F) of that Act(3).
6.—(1) Subject to paragraph (2), a partial property transfer to which this Order applies may not transfer property, rights or liabilities or include provision under the continuity powers to the extent that to do so would render unenforceable a market contract.
(2) The restriction in paragraph (1) does not apply to the extent that it would contradict any provision in a relevant property transfer instrument which applies subsection (6) or (7) of section 38 of the Act.
(3) In this Article, “relevant property transfer instrument” means any instrument made for the purposes of effecting a partial property transfer to which this Order applies.
7. A partial property transfer to which this Order applies which makes provision under section 34(7)(a) of the Act(4) may remove or alter the terms of the trust (howsoever arising) only to the extent necessary or expedient for the purpose of transferring from the recognised central counterparty to the transferee—
(a)the legal or beneficial interest of the recognised central counterparty in the property held on trust;
(b)any powers, rights or obligations of the recognised central counterparty in respect of the property held on trust.
8.—(1) This article applies to a partial property transfer to which this Order applies which is made by the Bank under section 44(5) or 46(6) of the Act.
(2) Subject to paragraph (3), a partial property transfer to which this article applies may not provide for the transfer of—
(a)any property, rights or liabilities which were not transferred under the original instrument; or
(b)any liability which was not, at the time immediately before the original instrument was made, a liability owed by the recognised central counterparty.
(3) Paragraph (2) does not apply to—
(a)a transfer of property, rights or liabilities which have accrued, become or ceased to become payable, changed or lapsed as a result of the application of a default event provision which applies by virtue of the original instrument;
(b)a transfer of property, rights or liabilities to which consent has been given by the transferee, the transferor and any other person whose consent for the transfer would be required were the transfer not being effected by a property transfer instrument;
(c)a transfer of a claim for damages or an award of damages against the recognised central counterparty which was in existence immediately before the original instrument was made;
(d)a transfer to an undertaking which has not entered insolvency; or
(e)a transfer under article 12(6).
(4) In this article—
(a)“original instrument” has the meaning given by section 44 or 46 of the Act; and
(b)the reference to insolvency includes a reference to—
(i)liquidation;
(ii)bank insolvency;
(iii)administration;
(iv)bank administration;
(v)receivership;
(vi)a composition with creditors; and
(vii)a scheme of arrangement.
9.—(1) A partial property transfer—
(a)to which this Order applies, and
(b)under which the transferor is a relevant company,
may not transfer property, rights or liabilities of the company unless the property, rights or liabilities are necessary for the carrying on of relevant business.
(2) For these purposes it does not matter whether relevant business has been transferred by a property transfer instrument.
(3) In this article—
“financial institution” has the meaning given by point (26) of Article 4(1) of Regulation (EU) No. 575/2013 of the European Parliament and the Council of 26th June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No. 648/2012(7);
“relevant business” means the business, or any part of the business, of a recognised central counterparty which is (or, but for the exercise of a stabilisation power, would be) in the same group as the relevant company; and
“relevant company” means a company, other than a financial institution, which—
is a group company in relation to which this Order has effect by virtue of section 81C of the Act(8); and
is not a parent undertaking of the recognised central counterparty in the same group in respect of which the Bank is satisfied for the purpose of section 81B(2) of the Act(9) that the general conditions for the exercise of a stabilisation power are met.
(4) For the purpose of the definition of “relevant business” undertakings are in the same group if they are group undertakings in respect of each other.
(5) Expressions defined in the Companies Act 2006(10) have the same meaning in this article as in that Act.
OJ No L 201, 27.7.2012, p1.
2000 c.8; section 286(1) was amended by the Financial Services Act 2012, Schedule 8, paragraphs 1, 2(1) and 2(2).
Subsection (4F) was inserted by the Financial Services Act 2012, section 30.
Subsection (7) will be amended when the Financial Services Act 2012, section 98(1),(2) is commenced.
The section heading will be amended when the Financial Services (Banking Reform)Act 2013 (c. 33), Schedule 2, paragraphs (1) and 16(h) are commenced. Subsection (2) will be amended when the Financial Services (Banking Reform) Act 2013, Schedule 2, paragraphs 1 and 16(a) are commenced. Subsection (3) was amended by the Financial Services Act 2012, section 97(1),(6)(a) and will be further amended when the the Financial Services (Banking Reform) Act 2013, Schedule 2, paragraphs1 and 16(b) are commenced. Subsection (4) will be amended when the Financial Services (Banking Reform) Act 2013, Schedule 2, paragraphs1 and 16(c) are commenced. Subsection (4A) was was inserted by the Financial Services Act 2012, section 97(1), (6)(b) and will be amended when the Financial Services (Banking Reform) Act 2013, Schedule 2, paragraphs 1 and 16(d) are commenced. Subsections (5) and (7) will be amended when the Financial Services (Banking Reform) Act 2013, Schedule 2, paragraphs 1 and 16(e), (g) are commenced. Subsection (6) was amended by the Financial Services Act 2012, Schedule 17, paragraphs 1 and 23 and will be amended when the Financial Services (Banking Reform) Act 2013, Schedule 2, paragraphs (1) and 16(f) are commenced.
Subsection (1) was amended by the Financial Services Act 2012, section 97(1), (7)(a). Subsection (3A) was inserted by the Financial Services Act 2012, section 97(1), (7)(b). Subsection (5A) will be inserted when the Financial Services Act 2012, section 98(1), (5) is commenced. Subsection (7) was amended by the Financial Services Act 2012, Schedule 17, paragraphs 1 and 25.
OJ no L176, 27/6/2013, p.1.
Section 81C was inserted by the Financial Services Act 2012, section 100.
Section 81B was inserted by the Financial Services Act 2012, section 100.