The Investor Compensation Scheme Regulations 1998

• Citation: S.I. 1998/2169
• Sections: 4

Section 1 Citation, commencement and interpretation

(1) These Regulations may be cited as the Investor Compensation Scheme Regulations 1998 and shall come into force on 26th September 1998.

(2) In these Regulations:

“investment firm” has the same meaning as in article 1 of the European Parliament and Council directive 97/9/ EC of 3 March 1997 on investor compensation schemes.

“relevant scheme” means a scheme for the payment of compensation to investors who suffer loss as a result of the inability of a participant in the scheme to meet its obligations arising out of investors' claims.

Section 2 Rights of the operators of relevant schemes in respect of investment firms

(1) This regulation applies to compensation paid to a person (“the claimant”) by the operator of a relevant scheme set up pursuant to the conditions and arrangements mentioned in section 43(2) of the Financial Services Act 1986 in respect of any liability of an investment firm which is or was a participant in the scheme.

(2) Where the operator of a relevant scheme pays compensation to which this regulation applies, the payment of compensation extinguishes the liability of that firm to the claimant to the extent of the compensation paid and confers on the operator a right of recovery against the firm which is otherwise identical to the claimant’s former rights in the claim or part thereof.

Section 3 Amendment of the Building Societies Act 1986

For subsection (4) of section 27 of the Building Societies Act 1986 shall be substituted the following–

(4) The Board may decline to make any payment under subsection (1) to a person who, in the opinion of the Board–

(a) had any responsibility for, or may have profited directly or indirectly from, the circumstances giving rise to the institution’s financial difficulties; or

(b) is entitled to receive a payment in respect of his protected investment under a scheme established under section 54 of the Financial Services Act 1986 or set up pursuant to the conditions and arrangements referred to in section 43(2) of that Act,

and where any payment as mentioned in paragraph (b) above has been received by a person, the Board shall decline to make a payment under subsection (1) to that person.

Section 4 Amendment of the Banking Act 1987

For subsection (5) of section 58 of the Banking Act 1987 shall be substituted the following–

(5) The Board may decline to make any payment under subsection (1) to a person who, in the opinion of the Board—

(a) has any responsibility for, or may have profited directly or indirectly from, the circumstances giving rise to the institution’s financial difficulties; or

(b) is entitled to receive a payment in respect of his protected deposit under a scheme established under section 54 of the Financial Services Act 1986 or set up pursuant to the conditions and arrangements referred to in section 43(2) of that Act,

and where any payment as mentioned in paragraph (b) above has been received by a person, the Board shall decline to make a payment under subsection (1) to that person.