Office of Public Sector Information
PART VII continued
(1) Section 61 of the Financial Services Act 1986 (injunctions and restitution orders) applies in relation to a contravention of any provision of the rules of a recognised investment exchange or recognised clearing house relating to the matters mentioned in Schedule 21 to this Act as it applies in relation to a contravention of any provision of such rules relating to the carrying on of investment business.
(2) The following provisions of the Financial Services Act 1986—
section 12 (compliance orders), as it applies by virtue of section 37(8) or 39(8),
section 37(7)(b) (revocation of recognition of UK investment exchange), and
section 39(7)(b) (revocation of recognition of UK clearing house),
apply in relation to a failure by a recognised investment exchange or recognised clearing house to comply with an obligation under this Part as to a failure to comply with an obligation under that Act.
(3) Where the recognition of an investment exchange or clearing house is revoked under the Financial Services Act 1986, the Secretary of State may, before or after the revocation order, give such directions as he thinks fit with respect to the continued application of the provisions of this Part, with such exceptions, additions and adaptations as may be specified in the direction, in relation to cases where a relevant event of any description specified in the directions occurred before the revocation order takes effect.
(4) The references in sections 119 and 121 of the [1986 c. 60.] Financial Services Act 1986 (competition) to what is necessary for the protection of investors shall be construed as including references to what is necessary for the purposes of this Part.
(5) Section 204 of the Financial Services Act 1986 (service of notices) applies in relation to a notice, direction or other document required or authorised by or under this Part to be given to or served on any person other than the Secretary of State.
(1) The Secretary of State may by regulations provide that this Part applies in relation to contracts connected with an overseas investment exchange or clearing house which is approved by him in accordance with such procedures as may be specified in the regulations, as satisfying such requirements as may be so specified, as it applies in relation to contracts connected with a recognised investment exchange or clearing house.
(2) The Secretary of State shall not approve an overseas investment exchange or clearing house unless he is satisfied—
(a) that the rules and practices of the body, together with the law of the country in which the body’s head office is situated, provide adequate procedures for dealing with the default of persons party to contracts connected with the body, and
(b) that it is otherwise appropriate to approve the body.
(3) The reference in subsection (2)(a) to default is to a person being unable to meet his obligations.
(4) The regulations may apply in relation to the approval of a body under this section such of the provisions of the [1986 c. 60.] Financial Services Act 1986 as the Secretary of State considers appropriate.
(5) The Secretary of State may make regulations which, in relation to a body which is so approved—
(a) apply such of the provisions of the Financial Services Act 1986 as the Secretary of State considers appropriate, and
(b) provide that the provisions of this Part apply with such exceptions, additions and adaptations as appear to the Secretary of State to be necessary or expedient;
and different provision may be made with respect to different bodies or descriptions of body.
(6) Where the regulations apply any provisions of the Financial Services Act 1986, they may provide that those provisions apply with such exceptions, additions and adaptations as appear to the Secretary of State to be necessary or expedient.
(1) The Secretary of State may by regulations provide that this Part applies to contracts of any specified description in relation to which settlement arrangements are provided by a person for the time being included in a list maintained by the Bank of England for the purposes of this section, as it applies to contracts connected with a recognised investment exchange or recognised clearing house.
(2) The Secretary of State shall not make any such regulations unless he is satisfied, having regard to the extent to which the contracts in question—
(a) involve, or are likely to involve, investments falling within paragraph 2 of Schedule 5 to the [1986 c. 60.] Financial Services Act 1986 (money market investments), or
(b) are otherwise of a kind dealt in by persons supervised by the Bank of England,
that it is appropriate that the arrangements should be subject to the supervision of the Bank of England.
(3) The approval of the Treasury is required for—
(a) the conditions imposed by the Bank of England for admission to the list maintained by it for the purposes of this section, and
(b) the arrangements for a person’s admission to and removal from the list;
and any regulations made under this section shall cease to have effect if the approval of the Treasury is withdrawn, but without prejudice to their having effect again if approval is given for fresh conditions or arrangements.
(4) The Bank of England shall publish the list as for the time being in force and provide a certified copy of it at the request of any person wishing to refer to it in legal proceedings.
A certified copy shall be evidence (in Scotland, sufficient evidence) of the contents of the list; and a copy purporting to be certified by or on behalf of the Bank shall be deemed to have been duly certified unless the contrary is shown.
(5) Regulations under this section may, in relation to a person included in the list—
(a) apply, with such exceptions, additions and adaptations as appear to the Secretary of State to be necessary or expedient, such of the provisions of the [1986 c. 60.] Financial Services Act 1986 as he considers appropriate, and
(b) provide that the provisions of this Part apply with such exceptions, additions and adaptations as appear to the Secretary of State to be necessary or expedient.
(6) Before making any regulations under this section, the Secretary of State shall consult the Treasury and the Bank of England.
(7) In section 84(1) of the [1987 c. 22.] Banking Act 1987 (disclosure of information obtained under that Act), in the Table showing the authorities to which, and functions for the purposes of which, disclosure may be made, at the end add—
| “A person included in the list maintained by the Bank for the purposes of section 171 of the Companies Act 1989. | Functions under settlement arrangements to which regulations under that section relate.” |
(1) The Secretary of State may by regulations provide that this Part applies to contracts of any specified description in relation to which settlement arrangements are provided by the Bank of England, as it applies to contracts connected with a recognised investment exchange or recognised clearing house.
(2) Regulations under this section may provide that the provisions of this Part apply with such exceptions, additions and adaptations as appear to the Secretary of State to be necessary or expedient.
(3) Before making any regulations under this section, the Secretary of State shall consult the Treasury and the Bank of England.
(1) In this Part “market charge” means a charge, whether fixed or floating, granted—
(a) in favour of a recognised investment exchange, for the purpose of securing debts or liabilities arising in connection with the settlement of market contracts,
(b) in favour of a recognised clearing house, for the purpose of securing debts or liabilities arising in connection with their ensuring the performance of market contracts, or
(c) in favour of a person who agrees to make payments as a result of the transfer of specified securities made through the medium of a computer-based system established by the Bank of England and The Stock Exchange, for the purpose of securing debts or liabilities of the transferee arising in connection therewith.
(2) Where a charge is granted partly for purposes specified in subsection (1)(a), (b) or (c) and partly for other purposes, it is a “market charge” so far as it has effect for the specified purposes.
(3) In subsection (1)(c)—
“specified securities” means securities for the time being specified in the list in Schedule 1 to the [1982 c. 41.] Stock Transfer Act 1982, and includes any right to such securities; and
“transfer”, in relation to any such securities or right, means a transfer of the beneficial interest.
(4) The Secretary of State may by regulations make further provision as to the charges granted in favour of any such person as is mentioned in subsection (1)(a), (b) or (c) which are to be treated as “market charges” for the purposes of this Part; and the regulations may add to, amend or repeal the provisions of subsections (1) to (3) above.
(5) The regulations may provide that a charge shall or shall not be treated as a market charge if or to the extent that it secures obligations of a specified description, is a charge over property of a specified description or contains provisions of a specified description.
(6) Before making regulations under this section in relation to charges granted in favour of a person within subsection (1)(c), the Secretary of State shall consult the Treasury and the Bank of England.
(1) The general law of insolvency has effect in relation to market charges and action taken in enforcing them subject to the provisions of section 175.
(2) The Secretary of State may by regulations make further provision modifying the law of insolvency in relation to the matters mentioned in subsection (1).
(3) The regulations may add to, amend or repeal the provisions mentioned in subsection (1), and any other provision of this Part as it applies for the purposes of those provisions, or provide that those provisions have effect with such exceptions, additions or adaptations as are specified in the regulations.
(4) The regulations may make different provision for cases defined by reference to the nature of the charge, the nature of the property subject to it, the circumstances, nature or extent of the obligations secured by it or any other relevant factor.
(5) Before making regulations under this section in relation to charges granted in favour of a person within section 173(1)(c), the Secretary of State shall consult the Treasury and the Bank of England.
(1) The following provisions of the [1986 c. 45.] Insolvency Act 1986 (which relate to administration orders and administrators) do not apply in relation to a market charge—
(a) sections 10(1)(b) and 11(3)(c) (restriction on enforcement of security while petition for administration order pending or order in force), and
(b) section 15(1) and (2) (power of administrator to deal with charged property);
and section 11(2) of that Act (receiver to vacate office when so required by administrator) does not apply to a receiver appointed under a market charge.
(2) However, where a market charge falls to be enforced after an administration order has been made or a petition for an administration order has been presented, and there exists another charge over some or all of the same property ranking in priority to or pari passu with the market charge, the court may order that there shall be taken after enforcement of the market charge such steps as the court may direct for the purpose of ensuring that the chargee under the other charge is not prejudiced by the e forcement of the market charge.
(3) The following provisions of the Insolvency Act 1986 (which relate to the powers of receivers) do not apply in relation to a market charge—
(a) section 43 (power of administrative receiver to dispose of charged property), and
(b) section 61 (power of receiver in Scotland to dispose of an interest in property).
(4) Sections 127 and 284 of the [1986 c. 45.] Insolvency Act 1986 (avoidance of property dispositions effected after commencement of winding up or presentation of bankruptcy petition), and section 32(8) of the [1985 c. 66.] Bankruptcy (Scotland) Act 1985 (effect of dealing with debtor relating to estate vested in permanent trustee), do not apply to a disposition of property as a result of which the property becomes subject to a market charge or any transaction pursuant to which that disposition is made.
(5) However, if a person (other than the chargee under the market charge) who is party to a disposition mentioned in subsection (4) has notice at the time of the disposition that a petition has been presented for the winding up or bankruptcy or sequestration of the estate of the party making the disposition, the value of any profit to him arising from the disposition is recoverable from him by the relevant office-holder unless the court directs otherwise.
(6) Any sum recoverable by virtue of subsection (5) ranks for priority, in the event of the insolvency of the person from whom it is due, immediately before preferential or, in Scotland, preferred debts.
(7) In a case falling within both subsection (4) above (as a disposition of property as a result of which the property becomes subject to a market charge) and section 164(3) (as the provision of margin in relation to a market contract), section 164(4) applies with respect to the recovery of the amount or value of the margin and subsection (5) above does not apply.
(1) The Secretary of State may by regulations provide that the general law of insolvency has effect in relation to charges of such descriptions as may be specified in the regulations, and action taken in enforcing them, subject to such provisions as may be specified in the regulations.
(2) The regulations may specify any description of charge granted in favour of—
(a) a body approved under section 170 (certain overseas exchanges and clearing houses),
(b) a person included in the list maintained by the Bank of England for the purposes of section 171 (certain money market institutions),
(c) the Bank of England,
(d) an authorised person within the meaning of the [1986 c. 60.] Financial Services Act 1986, or
(e) an international securities self-regulating organisation within the meaning of that Act,
for the purpose of securing debts or liabilities arising in connection with or as a result of the settlement of contracts or the transfer of assets, rights or interests on a financial market.
(3) The regulations may specify any description of charge granted for that purpose in favour of any other person in connection with exchange facilities or clearing services provided by a recognised investment exchange or recognised clearing house or by any such body, person, authority or organisation as is mentioned in subsection (2).
(4) Where a charge is granted partly for the purpose specified in subsection (2) and partly for other purposes, the power conferred by this section is exercisable in relation to the charge so far as it has effect for that purpose.
(5) The regulations may—
(a) make the same or similar provision in relation to the charges to which they apply as is made by or under sections 174 and 175 in relation to market charges, or
(b) apply any of those provisions with such exceptions, additions or adaptations as are specified in the regulations.(6) Before making regulations under this section relating to a description of charges defined by reference to their being granted—
(a) in favour of a person included in the list maintained by the Bank of England for the purposes of section 171, or in connection with exchange facilities or clearing services provided by a person included in that list, or
(b) in favour of the Bank of England, or in connection with settlement arrangements provided by the Bank,
the Secretary of State shall consult the Treasury and the Bank of England.
(7) Regulations under this section may provide that they apply or do not apply to a charge if or to the extent that it secures obligations of a specified description, is a charge over property of a specified description or contains provisions of a specified description.
(1) The following provisions have effect with respect to the application by a recognised investment exchange or recognised clearing house of property (other than land) held by the exchange or clearing house as margin in relation to a market contract.
(2) So far as necessary to enable the property to be applied in accordance with the rules of the exchange or clearing house, it may be so applied notwithstanding any prior equitable interest or right, or any right or remedy arising from a breach of fiduciary duty, unless the exchange or clearing house had notice of the interest, right or breach of duty at the time the property was provided as margin.
(3) No right or remedy arising subsequently to the property being provided as margin may be enforced so as to prevent or interfere with the application of the property by the exchange or clearing house in accordance with its rules.
(4) Where an exchange or clearing house has power by virtue of the above provisions to apply property notwithstanding an interest, right or remedy, a person to whom the exchange or clearing house disposes of the property in accordance with its rules takes free from that interest, right or remedy.
(1) The Secretary of State may by regulations provide that a market charge which is a floating charge has priority over a charge subsequently created or arising, including a fixed charge.
(2) The regulations may make different provision for cases defined, as regards the market charge or the subsequent charge, by reference to the description of charge, its terms, the circumstances in which it is created or arises, the nature of the charge, the person in favour of whom it is granted or arises or any other relevant factor.
Where property subject to an unpaid vendor’s lien becomes subject to a market charge, the charge has priority over the lien unless the chargee had actual notice of the lien at the time the property became subject to the charge.
(1) Where property (other than land) is held by a recognised investment exchange or recognised clearing house as margin in relation to market contracts or is subject to a market charge, no execution or other legal process for the enforcement of a judgment or order may be commenced or continued, and no distress may be levied, against the property by a person not seeking to enforce any interest in or security over the property, except with the consent of—
(a) in the case of property provided as cover for margin, the investment exchange or clearing house in question, or
(b) in the case of property subject to a market charge, the person in whose favour the charge was granted.
(2) Where consent is given the proceedings may be commenced or continued notwithstanding any provision of the [1986 c. 45.] Insolvency Act 1986 or the [1985 c. 66.] Bankruptcy (Scotland) Act 1985.
(3) Where by virtue of this section a person would not be entitled to enforce a judgment or order against any property, any injunction or other remedy granted with a view to facilitating the enforcement of any such judgment or order shall not extend to that property.
(4) In the application of this section to Scotland, the reference to execution being commenced or continued includes a reference to diligence being carried out or continued, and the reference to distress being levied shall be omitted.
(1) The power of the Secretary of State to make provision by regulations under—
(a) section 170, 171 or 172 (power to extend provisions relating to market contracts), or
(b) section 176 (power to extend provisions relating to market charges),
includes power to apply sections 177 to 180 to any description of property provided as cover for margin in relation to contracts in relation to which the power is exercised or, as the case may be, property subject to charges in relation to which the power is exercised.
(2) The regulations may provide that those sections apply with such exceptions, additions and adaptations as may be specified in the regulations.
(1) The powers conferred by this section are exercisable by the court where insolvency proceedings in respect of—
(a) a member of a recognised investment exchange or a recognised clearing house, or
(b) a person by whom a market charge has been granted,
are begun on or after 22nd December 1988 and before the commencement of this section.
That person is referred to in this section as “the relevant person”.
(2) For the purposes of this section “insolvency proceedings” means proceedings under Part II, IV, V or IX of the [1986 c. 45.] Insolvency Act 1986 (administration, winding up and bankruptcy) or under the [1985 c. 66.] Bankruptcy (Scotland) Act 1985; and references in this section to the beginning of such proceedings are to—
(a) the presentation of a petition on which an administration order, winding-up order, bankruptcy order or award of sequestration is made, or
(b) the passing of a resolution for voluntary winding up.
(3) This section applies in relation to—
(a) in England and Wales, the administration of the insolvent estate of a deceased person, and
(b) in Scotland, the administration by a judicial factor appointed under section 11A of the [1889 c. 39.] Judicial Factors (Scotland) Act 1889 of the insolvent estate of a deceased person,
as it applies in relation to insolvency proceedings.
In such a case references to the beginning of the proceedings shall be construed as references to the death of the relevant person.
(4) The court may on an application made, within three months after the commencement of this section, by—
(a) a recognised investment exchange or recognised clearing house, or
(b) a person in whose favour a market charge has been granted,
make such order as it thinks fit for achieving, except so far as assets of the relevant person have been distributed before the making of the application, the same result as if the provisions of Schedule 22 had come into force on 22nd December 1988.
(5) The provisions of that Schedule (“the relevant provisions”) reproduce the effect of certain provisions of this Part as they appeared in the Bill for this Act as introduced into the House of Lords and published on that date.
(6) The court may in particular—
(a) require the relevant person or a relevant office-holder—
(i) to return property provided as cover for margin or which was subject to a market charge, or to pay to the applicant or any other person the proceeds of realisation of such property, or
(ii) to pay to the applicant or any other person such amount as the court estimates would have been payable to that person if the relevant provisions had come into force on 22nd December 1988 and market contracts had been settled in accordance with the rules of the recognised investment exchange or recognised clearing house, or a proportion of that amount if the property of the relevant person or relevant office-holder is not sufficient to meet the amount in full;
(b) provide that contracts, rules and dispositions shall be treated as not having been void;
(c) modify the functions of a relevant office-holder, or the duties of the applicant or any other person, in relation to the insolvency proceedings, or indemnify any such person in respect of acts or omissions which would have been proper if the relevant provisions had been in force;
(d) provide that conduct which constituted an offence be treated as not having done so;
(e) dismiss proceedings which could not have been brought if the relevant provisions had come into force on 22nd December 1988, and reverse the effect of any order of a court which could not, or would not, have been made if those provisions had come into force on that date.
(7) An order under this section shall not be made against a relevant office-holder if the effect would be that his remuneration, costs and expenses could not be met.
(1) The references to insolvency law in section 426 of the Insolvency[1986 c. 45.] Act 1986 (co-operation with courts exercising insolvency jurisdiction in other jurisdictions) include, in relation to a part of the United Kingdom, the provisions made by or under this Part and, in relation to a relevant country or territory within the meaning of that section, so much of the law of that country or territory as corresponds to any provisions made by or under this Part.
(2) A court shall not, in pursuance of that section or any other enactment or rule of law, recognise or give effect to—
(a) any order of a court exercising jurisdiction in relation to insolvency law in a country or territory outside the United Kingdom, or
(b) any act of a person appointed in such a country or territory to discharge any functions under insolvency law,
in so far as the making of the order or the doing of the act would be prohibited in the case of a court in the United Kingdom or a relevant office-holder by provisions made by or under this Part.
(3) Subsection (2) does not affect the recognition or enforcement of a judgment required to be recognised or enforced under or by virtue of the [1982 c. 27.] Civil Jurisdiction and Judgments Act 1982.
(1) Where a relevant office-holder takes any action in relation to property of a defaulter which is liable to be dealt with in accordance with the default rules of a recognised investment exchange or recognised clearing house, and believes and has reasonable grounds for believing that he is entitled to take that action, he is not liable to any person in respect of any loss or damage resulting from his action except in so far as the loss or damage is caused by the office-holder’s own negligence.
(2) Any failure by a recognised investment exchange or recognised clearing house to comply with its own rules in respect of any matter shall not prevent that matter being treated for the purposes of this Part as done in accordance with those rules so long as the failure does not substantially affect the rights of any person entitled to require compliance with the rules.
(3) No recognised investment exchange or recognised clearing house, nor any officer or servant or member of the governing body of a recognised investment exchange or recognised clearing house, shall be liable in damages for anything done or omitted in the discharge or purported discharge of any functions to which this subsection applies unless the act or omission is shown to have been in bad faith.
(4) The functions to which subsection (3) applies are the functions of the exchange or clearing house so far as relating to, or to matters arising out of—
(a) its default rules, or
(b) any obligations to which it is subject by virtue of this Part.
(5) No person exercising any functions by virtue of arrangements made pursuant to paragraph 5 or 12 of Schedule 21 (delegation of functions in connection with default procedures), nor any officer or servant of such a person, shall be liable in damages for anything done or omitted in the discharge or purported discharge of those functions unless the act or omission is shown to have been in bad faith.
(1) The Secretary of State may by regulations make such further provision as appears to him necessary or expedient for the purposes of this Part.
(2) Provision may, in particular, be made—
(a) for integrating the provisions of this Part with the general law of insolvency, and
(b) for adapting the provisions of this Part in their application to overseas investment exchanges and clearing houses.
(3) Regulations under this section may add to, amend or repeal any of the provisions of this Part or provide that those provisions have effect subject to such additions, exceptions or adaptations as are specified in the regulations.
(1) Regulations under this Part may make different provision for different cases and may contain such incidental, transitional and other supplementary provisions as appear to the Secretary of State to be necessary or expedient.
(2) Regulations under this Part shall be made by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.
(1) Where a person enters into market contracts in more than one capacity, the provisions of this Part apply (subject as follows) as if the contracts entered into in each different capacity were entered into by different persons.
(2) References in this Part to a market contract to which a person is a party include (subject as follows, and unless the context otherwise requires) contracts to which he is party as agent.
(3) The Secretary of State may by regulations—
(a) modify or exclude the operation of subsections (1) and (2), and
(b) make provision as to the circumstances in which a person is to be regarded for the purposes of those provisions as acting in different capacities.
(1) In this Part “default rules” means rules of a recognised investment exchange or recognised clearing house which provide for the taking of action in the event of a person appearing to be unable, or likely to become unable, to meet his obligations in respect of one or more market contracts connected with the exchange or clearing house.
(2) References in this Part to a “defaulter” are to a person in respect of whom action has been taken by a recognised investment exchange or recognised clearing house under its default rules, whether by declaring him to be a defaulter or otherwise; and references in this Part to “default” shall be construed accordingly.
(3) In this Part “default proceedings” means proceedings taken by a recognised investment exchange or recognised clearing house under its default rules.
(4) If an exchange or clearing house takes action under its default rules in respect of a person, all subsequent proceedings under its rules for the purposes of or in connection with the settlement of market contracts to which the defaulter is a party shall be treated as done under its default rules.
(1) The following are relevant office-holders for the purposes of this Part—
(a) the official receiver,
(b) any person acting in relation to a company as its liquidator, provisional liquidator, administrator or administrative receiver,
(c) any person acting in relation to an individual (or, in Scotland, any debtor within the meaning of the [1985 c. 66.] Bankruptcy (Scotland) Act 1985) as his trustee in bankruptcy or interim receiver of his property or as permanent or interim trustee in the sequestration of his estate,
(d) any person acting as administrator of an insolvent estate of a deceased person.
(2) In subsection (1)(b) “company” means any company, society, association, partnership or other body which may be wound up under the [1986 c. 45.] Insolvency Act 1986.
(1) In this Part—
“administrative receiver” has the meaning given by section 251 of the Insolvency Act 1986;
“charge” means any form of security, including a mortgage and, in Scotland, a heritable security;
“clearing house” has the same meaning as in the [1986 c. 60.] Financial Services Act 1986;
“interim trustee” and “permanent trustee” have the same meaning as in the Bankruptcy (Scotland) Act 1985;
“investment” and “investment exchange” have the same meaning as in the Financial Services Act 1986;
“overseas”, in relation to an investment exchange or clearing house, means having its head office outside the United Kingdom;
“recognised” means recognised under the Financial Services Act 1986;
“set-off”, in relation to Scotland, includes compensation;
“The Stock Exchange” means The International Stock Exchange of the United Kingdom and the Republic of Ireland Limited;
“UK”, in relation to an investment exchange or clearing house, means having its head office in the United Kingdom.
Companies Act 1989