Declaration of default
Rule 6.3.2 "... the FSCS... may determine a relevant person to be in default when it is, in the opinion of the FSCS... unable to satisfy protected claims against it or likely to be unable to satisfy protected claims against it."
Rule 6.3.4. "For claims arising in connection with protected investment business, the FSCS has the additional power to determine that a relevant person is in default if it is satisfied that a protected claim exists, and;
(1) the FSCS is satisfied that the relevant person cannot be contacted at its last place of business and that reasonable steps have been taken to establish a forwarding or current address, but without success; and
(2) there appears to the FSCS to be no evidence that the relevant person will be able to meet claims against it."
Introduction
This policy does not apply to a determination of default that arises following formal insolvency procedures or other automatic triggers set down in Rule 6.3.3. This is because the relevant person has had an opportunity to challenge an order or process of the court or a determination by their home state regulator. The objective of this policy is to give a similar opportunity to relevant persons who have not yet been the subject of insolvency or similar proceedings. This includes firms that are still trading and sole traders or partnerships who have ceased trading but continue to be personally liable to meet claims arising from their regulated activities.
Policy: Contact with the relevant person
Although the detailed procedures may vary or be modified from time to time, FSCS will take the following steps:
1. On receiving a claim that merits investigation, FSCS will write to the relevant person at its last known address to notify them of the investigation and to request information as to whether they can satisfy protected claims against them (for example, requesting completion of a statement of assets and liabilities). The last known business address will be verified (if possible) from the regulator's records.
2. If we receive no response to this letter from, or on behalf, of the relevant person, we will send a follow-up letter by registered post or recorded delivery 14 days after the first letter.
3. If we receive no response within 7 days of the follow-up letter, we will where possible reissue the first letter and redirect it to another contact address, if known (e.g. a current working address or home address of a former director/principal, or an earlier business address).
4. If we receive no response within 14 days of either the follow-up letter or the redirected letter, we will assess the ability of the relevant person to satisfying potential claims against it after making reasonable enquiries (including, but not limited to, obtaining filed accounts from Companies House in respect of a company, or conducting bankruptcy and property searches in respect of sole traders and partners).
5. If, after assessing all the information obtained (whether from the relevant person or its representatives or from other sources), we believe the relevant person is unable or likely to be unable to satisfy protected claims against it, we will write to their contact address (or, if they have not responded to the last known address) to notify them that we intend to determine the firm in default. This letter will allow the relevant person 14 days to raise any objection or make any comment.
Policy: Review of decision
6. On receiving any objection or comment from or on behalf of the relevant person, we will review the objection or comment and (unless we require further information at this stage) will notify the relevant person in writing whether we still intend to declare them in default (in which case we will provide brief written reasons) or have decided not to do so. We will give the relevant person a further period of 14 days in which to respond if we intend to declare it in default.
7. If we intend to declare the relevant person to be in default and they still object to this because of a material fact relevant to our assessment of the relevant person's ability to satisfy protected claims against it, we will offer them the opportunity to speak at an an interview or meeting or oral hearing with us, to be attended on our behalf of FSCS by the Chief Executive and at least one non-executive director.
8. If the relevant person chooses to speak in this way and we offer them a meeting or interview or oral hearing for this purpose, the exact procedure for that process may be established at that time, if possible with their agreement. The relevant person may but does not have to have legal (or other) representation. The process should be flexible and informal. The issues to be decided at any oral hearing will be limited to those identified by the relevant person in written submissions and which relate to facts which are material to the decision. After the meeting or interview or oral hearing, we will confirm our decision and provide written reasons.
9. If the relevant person contacts us before we publicise their default but after we have followed the procedure at paragraphs 1-5 above, and previously received no response from the relevant person and declared them in default, then they will be entitled to raise any objection or make any comment within 14 days of contacting us. After we have received their comment or objection, the procedure at paragraphs 6 - 8 will apply.
10. If following the meeting or interview or oral hearing, the relevant person persists with its objection, it may seek a judicial review of the decision determining it to be in default.
