Citation and commencement

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.

Interpretation

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 ^F1] ;

“ 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—

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

[^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]

[^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; ^F2]

^M2 “ contributory ” has the meaning set out in section 79 of the Insolvency Act ;

“ court ” means—

“ 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;

^M3 “ the Disqualification Act ” means the Company Directors Disqualification Act 1986 ;

^F3...

^F3...

“ enactment ” includes—

^M4and any EU Instrument (as defined in Part 2 of Schedule 1 of the European Communities Act 1972 );

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

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

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

[^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 ^M5 ;

“ the Insolvency Act ” means the Insolvency Act 1986 ^M6 ;

“ 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 ^M7 applies as a result of the operation of section 173 of that Act ^M8 ;

“ 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 ^M9 ;

“ market infrastructure body ” means a recognised clearing house, [^F6 recognised CSD, ^F6] recognised investment exchange ^F8[^F7 ..., third country central counterparty ^F7] , recognised overseas clearing house ^F8[^F9 ..., third country CSD ^F9] 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]

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

“ 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; ^F11]

“ 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 [^F12 a recognition order has been made ^F12] under section 292 of FSMA ^M10 declaring them to be a recognised clearing house;

“ recognised overseas investment exchange ” means an overseas person in respect of whom [^F13 a recognition order has been made ^F13] 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; ^F14]

“ Schedule B1 ” means Schedule B1 to the Insolvency Act ^M11 ;

“ 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 ^M12 ;

“ 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—

“ 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—

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

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

“ 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 ^M13 .

[^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.^F17]

(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 ^M14 have the same meaning as in that Act.

(7) Regulation 26 applies with respect to the application of these Regulations to Northern Ireland.^F5]

Overview

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^F18] ; 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^F19] , may apply for an order to put the bank into—

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

[^F20 (ii)^F20] 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.

Special administration order

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^F21] .

(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.

Application

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)^M15the designated officer for a magistrates' court in the exercise of the power conferred by section 87A of the Magistrates' Courts Act 1980 (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)^F22the Secretary of State; ...

[^F23 (h)the FCA; or

(i)if the investment bank is a PRA-authorised person, the PRA^F23] .

(2) Where an application is made by a person other than the [^F24FCA^F24] , the [^F24FCA^F24] 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.^F25]

(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^F26] 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.

Grounds for applying

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^F27] 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.

^M16(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) of the Insolvency Act (petition for winding up on grounds of public interest).

Powers of the court

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)^M17on the application of the [^F28FCA^F28] , treat the application as an administration application by the [^F28FCA^F28] under Schedule B1 in accordance with section 359(1) of FSMA ; 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;^F29]

(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^F30] ) 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.

Notice to [^F31appropriate regulator^F31] of preliminary steps to other insolvency proceedings

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.^F32]

(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^F31] 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^F31] , has ended, or

(ii)the [^F31appropriate regulator^F31] 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^F31] 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—

“ 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—

Application where investment bank is a deposit-taking bank

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 objectives

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);

(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 FSCS

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).^F35]

[^F36Objective 1—transfer of client assets

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—

“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. ^F36]

[^F36Restrictions on partial property transfers—general provision

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). ^F36]

[^F36Restrictions on partial property transfers—set-off and netting arrangements

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”—

“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—

“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 . ^F36]

[^F36Restrictions on partial property transfers—security interests

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). ^F36]

[^F36Restrictions on partial property transfers—capital market arrangements

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). ^F36]

[^F36Restrictions on partial property transfers—financial markets

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^F37] ; or

(c)the rules of a recognised investment exchange [^F37 , recognised clearing house or recognised CSD^F37] 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). ^F36]

[^F38Objective 1—post-administration reconciliation of accounts and records relating to client money

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—

[^F38Objective 1—removal of right to interest on unsecured claims for the return of client money

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.^F38]

Objective 1 – distribution of client assets

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)).^F39]

(5) Where the administrator, after setting a bar date, has returned client assets [^F40with the approval of the court^F40] , 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^F41] .

Objective 1 - shortfall in client assets held in omnibus account

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^F42] .

(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—

“ 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.

[^F43Objective 1—distribution of client money

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). ^F43]

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

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—

“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—

“soft bar date” means a bar date set under regulation 11. ^F43]

[^F43Objectives 1 and 3—client money which the administrator is unable to return to clients

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—

“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—

[^F43Powers of the court on application to set a hard bar date

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.^F43]

[^F43Bar date notices—procedural requirements

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—

“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. ^F43]

[^F43Costs of making a claim

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.^F43]

Objective 2 – engaging with market infrastructure bodies and the Authorities

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,^F44] 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—

^M18 “ default arrangements ” has the meaning set out in regulation 2(1) of the Financial Markets and Insolvency (Settlement Finality) Regulations 1999 ; and

^M19 “ default rules ” has the meaning set out in section 188 of the Companies Act 1989 .

Continuity of supply

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;

^M20 “ relevant system ” has the meaning set out in regulation 2(1) of the Uncertificated Securities Regulations 2001 ;

“ 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—

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

General powers, duties and effect

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)[^F46 except where otherwise specified in Table 2,^F46] 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). ^F47]

[^F92Appropriate regulator^F92] direction

16.—(1) The [^F93appropriate regulator^F93] 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^F94] 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^F95] 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.^F96]

(5) If the [^F95appropriate regulator^F95] 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^F95] 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.^F97]

Administrator's proposals in the event of [^F98Appropriate regulator^F98] direction

^F10017.—(1) Where the [^F99FCA or the PRA^F99] 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 ... 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^F101] .

(4) If the administrator is unable to agree the statement with [^F101the regulator which has given the direction^F101] , 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.

^F102(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 ... 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^F103] ; 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^F104] 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).

Revision of proposals in the event of [^F105Appropriate regulator^F105] direction

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^F106] (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)[^F107 that regulator^F107] has not withdrawn its direction given under regulation 16.

(2) The administrator shall agree the revised statement with [^F107that regulator^F107] .

(3) Regulation 17(4) to (7) shall apply where the administrator is unable to agree the revised statement with [^F107that regulator^F107] .

(4) After the revised statement has been agreed with [^F107that regulator^F107] (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.

[^F108Appropriate regulator^F108] direction withdrawn

^F11019.—(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^F109] or the court has made an order dispensing with the need for agreement under regulation 17, the ... 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.

[^F111Responsibility for certain costs of the administration

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—

Successful rescue

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^F112] .

Dissolution or voluntary arrangement

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.

^M22(5) The action that may be taken by a court under section 5(3) (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 [^F115 8^F115] 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).^F113]

(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.

Special administration order as an alternative order

22.—(1) On a petition for a winding up order [^F116,^F116] an application for an administration order [^F117or an order under regulation 8 of the Payment and Electronic Money Institution Insolvency Regulations 2021^F117] 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^F118] .

Disqualification of directors

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.^F119]

^M23(4) In section 21 of the Disqualification Act (interaction with the Insolvency Act), the references to the provisions of the Insolvency Act include those provisions as applied by these Regulations.

Limited liability partnerships

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

Partnerships

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 enactments

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 legislation

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.

Regulation 9

SCHEDULE 1 Special administration (bank insolvency)

1. This Schedule provides for a procedure known as special administration (bank insolvency) to be used as an alternative to bank insolvency (as set out in Part 2 of the Act) where the investment bank is a deposit-taking bank.

2. A special administration (bank insolvency) order is an order appointing a person as the administrator for the purpose of this Schedule.

3. A special administration (bank insolvency) order is to be treated as a special administration order and an administrator appointed under a special administration (bank insolvency) order is to be treated as if they were appointed under a special administration order for all purposes, save that—

(a) the modifications set out in this Schedule shall apply; and

(b) in regulation 22, the Bank of England may also make an application under paragraph (1) and the [^F120FCA or the PRA^F120] can only make an application with the consent of the Bank of England.

4.—(1) An administrator appointed under a special administration (bank insolvency) order has the following objectives—

(a) Objective A is to work with the FSCS so as to ensure that as soon as is reasonably practicable each eligible depositor—

(i) has the relevant account transferred to another financial institution, or

(ii) receives payments from (or on behalf of) the FSCS; and

(b) the special administration objectives as set out in regulation 10.

(2) Objective A takes precedence over the special administration objectives until a full payment resolution is passed (but the administrator is to begin working towards the special administration objectives immediately on appointment, in accordance with regulation 10).

(3) The administrator must not comply with a direction of the [^F121FCA or the PRA^F121] given under regulation 16 in a way which prejudices the achievement of Objective A.

5.—(1) The provisions of the Insolvency Act as applied by regulation 15 shall apply to special administration (bank insolvency) subject to the following additional modifications to Schedule B1—

(a) the FSCS shall be appointed as a member of the creditors' committee referred to in paragraph 57 unless it informs the administrator that it does not wish to be appointed;

(b) the Objective A committee may also make an application under paragraph 74(2));

(c) disregard paragraph 81;

(d) in the application of paragraph 87, before the Objective A committee has passed a full payment resolution, the administrator may only resign with the consent of the Bank of England and the notice of resignation shall be copied to the Bank of England;

(e) before the Objective A committee has passed a full payment resolution, only the Bank of England or the Objective A committee may make an application to remove the administrator from office under paragraph 88;

(f) the notice given under paragraph 89(2)(a) must also be copied to the Bank of England;

(g) before the passing of the full payment resolution, paragraph 91 has effect as if it provided for the Bank of England to appoint a replacement administrator as soon as is reasonably practicable;

(h) the Bank of England may also make an application under paragraph 103(2); and

(i) a reference to a provisional liquidator is to a person appointed under section 135 of the Insolvency Act as applied by paragraph 8.

(2) If any application is made to the court under these Regulations (including under the Insolvency Act as applied by these Regulations) before the Objective A committee has passed a full payment resolution, the court, in giving directions, must have regard to the achievement of Objective A.

6.—(1) The provisions of Part 2 of the Act (bank insolvency) set out in the Table apply in relation to special administration (bank insolvency) with the following modifications—

(a) the modifications set out in sub-paragraph (2); and

(b) any other modification specified in the Table.

(2) The modifications are that a reference to—

(a) a bank is to a deposit-taking bank;

(b) bank insolvency is to special administration (bank insolvency);

(c) a bank insolvency order is to a special administration (bank insolvency) order;

(d) the bank liquidator is to the administrator;

(e) Objective 1 in section 99 of the Act or Objective 1 is to Objective A;

(f) the liquidation committee is to the Objective A committee;

(g) rules made under section 411 of the Insolvency Act 1986 is to insolvency rules; and

(h) section 168(5) of the Insolvency Act is to paragraph 74(2) of Schedule B1 (as applied by regulation 15).

7. Section 120 of the Act is applied with the following modifications—

(a) in subsection (7)(b), the reference to a bank insolvency order includes a special administration order;

(b) in subsection (8), the reference to bank insolvency order includes a special administration order or a special administration (bank insolvency) order;

(c) in subsection (10)(b), the reference to bank insolvency order includes a special administration order or a special administration (bank insolvency) order; and

(d) in subsection (10)(c), the reference to bank insolvency order includes a special administration (bank insolvency) order.

8.—(1) Section 135 of the Insolvency Act is applied with the following modifications where an application is made for a special administration (bank insolvency) order—

(a) in subsection (1), the reference to the presentation of a winding up petition is to an application for a special administration (bank insolvency) order;

(b) in subsection (2)—

(i) the reference to England and Wales includes Scotland,

(ii) the reference to a winding up order is to a special administration order,

(iii) “ other fit person ” means a person qualified to act as an insolvency practitioner [^F122 in relation to the investment bank ^F122] and who consents to act, and

(iv) ignore the reference to the official receiver; and

(c) subsection (3) is not applied.

(2) A person appointed under section 135 (as applied by this paragraph)—

(a) must not pay dividends to creditors;

(b) may only be removed by order of the court; and

(c) shall vacate office if they cease to be qualified to act as a insolvency practitioner [^F123in relation to the investment bank^F123] .

(3) The appointment of the person appointed under section 135 (as applied by this paragraph) lapses on the appointment of an administrator under a special administration (bank insolvency) order.

9. In this Schedule—

“ eligible depositor ” has the meaning set out in section 93(3) of the Act;

“ full payment resolution ” has the meaning set out in section 100(5) of the Act as applied by paragraph 6;

“ Objective A ” has the meaning set out in paragraph 4; and

“ Objective A committee ” means the committee set up to oversee the achievement of Objective A in paragraph 4, (see paragraph 6(2) and the modification to section 100 of the Act in paragraph 6).

Regulation 9

SCHEDULE 2 Special administration (bank administration)

General provisions

1. This Schedule provides for a procedure known as special administration (bank administration) to be used as an alternative to bank administration (as set out in Part 3 of the Act) where part of the business of the [^F124investment^F124] bank is sold to a commercial purchaser in accordance with section 11 of the Act, or transferred to a bridge bank in accordance with section 12 (and it can also be used in certain cases of multiple transfers under Part 1 of the Act).

2. A special administration (bank administration) order is an order appointing a person as an administrator for the purposes of this Schedule.

3.—(1) An administrator appointed under a special administration (bank administration) order has the following objectives—

(a) Objective A: to provide support for a private sector purchaser or bridge bank (see section 138 of the Act as applied by paragraph 6), and

(b) the special administration objectives as set out in regulation 10.

(2) Objective A takes precedence over the special administration objectives until the Bank of England notifies the administrator that the residual bank is no longer required in connection with the private sector purchaser or bridge bank, but the administrator is to begin working on the special administration objectives immediately on appointment in accordance with regulation 10.

(3) A notice under sub-paragraph (2) is referred to as an “ Objective A Achievement Notice ”.

(4) The administrator must not comply with a direction of the [^F125FCA or the PRA^F125] given under regulation 16 in a way which prejudices the achievement of Objective A.

(5) In pursuing the special administration objectives following transfer to a bridge bank, the administrator may not realise any asset unless—

(a) the asset is on a list of realisable assets agreed between the administrator and the Bank of England; or

(b) the Bank of England has given an Objective A Achievement Notice.

(6) The reference to ‘asset’ in sub-paragraph (5) does not include client assets.

4. An administrator appointed under a special administration (bank administration) order is to be treated as if they were appointed under a special administration order subject to any modification made by this Schedule.

5. A special administration (bank administration) order is to be treated for all purposes as a special administration order save that—

(a) regulations 20 and 21 do not apply;

(b) regulation 15 does not apply except where otherwise stated;

(c) the modifications set out in this Schedule shall apply.

Application of Part 3 of the Act and the Insolvency Act

6.—(1) The provisions of Part 3 of the Act (bank administration) set out in the Table apply in relation to a special administration (bank administration) with the following modifications—

(a)the modifications set out in sub-paragraph (2); and

(b)any other modification specified in the Table.

(2) The modifications are that a reference to—

(a)a bank is to an [^F124investment^F124] bank;

(b)bank administration is to special administration (bank administration);

(c)a bank administration order is to a special administration (bank administration) order;

(d)the bank administrator is to the administrator;

(e)Objective 1, or Objective 1 in section 137 or 138, is to Objective A in paragraph 3;

(f)the Objectives in section 137 is to Objective A and the special administration objectives;

(g)an Objective 1 Achievement Notice is to an Objective A Achievement Notice;

(h)an Objective 1 Interim Achievement Notice is to an Objective A Interim Achievement Notice (see section 150 of the Act as applied by the Table);

(i) “ provisional liquidator ” means a person appointed under section 135 of the Insolvency Act, as applied by this Schedule; and

(j)rules made under section 411 of the Insolvency Act 1986 is to insolvency rules.

(3) Where section 145 of the Act applies a provision of the Insolvency Act with a modification, that provision applies in relation to special administration (bank administration) with that modification unless otherwise stated in the Table.

(4) Where a provision of the Insolvency Act is set out in Table 2 in regulation 15(6), but is not applied by section 145 of the Act, that provision also applies to special administration (bank administration) with the modifications specified in that regulation and in sub-paragraph (2).

Statement of proposals

7. —(1) In a special administration (bank administration), the proposals setting out how the purpose of the administration is to be achieved (“ the statement ”) shall be drawn up as follows.

(2) The administrator must, as soon as is reasonably practicable after the [^F124investment^F124] bank enters special administration (bank administration), make a statement setting out proposals for achieving Objective A and the special administration objectives.

(3) In a case of special administration (bank administration) following transfer to a bridge bank, before making the statement the administrator must consult the Bank of England about the likelihood of a payment to the residual bank from a scheme established by a resolution fund order under section 49(3) of the Act.

8.—(1) The statement is to be agreed with the Bank of England and, where [^F128a regulator^F128] has given a direction under regulation 16, with [^F129that regulator^F129] .

(2) If [^F130neither regulator has^F130] given a direction under regulation 16 and the administrator is unable to agree a statement with the Bank of England—

(a) the administrator may apply to the court for directions under paragraph 63 of Schedule B1 (as applied by section 145 of the Act and this Schedule); and

(b) the court may make any order it considers appropriate, including dispensing with the need for the Bank of England's agreement.

(3) If [^F131a regulator has^F131] given a direction under regulation 16 which has not been withdrawn and the administrator is unable to agree a statement with either the Bank of England[^F132 or that regulator^F132] , the administrator may apply to the court for directions under paragraph 63 of Schedule B1.

(4) Following an application under sub-paragraph (3), 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.

(5) The court may make an order in sub-paragraph (4)(a) only if it considers that—

(i)^F133 the proposals set out in the statement are reasonably likely to ensure that the administrator acts in accordance with the ... direction, and

(ii)^F133 the ... direction is not likely to prejudice the achievement of Objective A.

(6) Where the court makes an order, the administrator shall as soon as reasonably practicable send the order to the registrar of companies and to such persons as may be prescribed.

9.—(1) The administrator shall send the statement to—

(a) the [^F134FCA and, where the investment bank concerned is a PRA-authorised person, the PRA^F134] ;

(b) the FSCS;

(c) the registrar of companies;

(d) every creditor of the [^F124investment^F124] bank of whose claim and address the administrator is aware;

(e) every member of the [^F124investment^F124] bank of whose address the administrator is aware; and

(f) every client of the [^F124investment^F124] bank of whose claim the administrator is aware and of whom the administrator has a means of contacting.

(2) The administrator shall comply with sub-paragraph (1) not later than 10 business days after—

(a) obtaining the agreement of the Bank of England (and where [^F135a regulator^F135] has given a direction, [^F136that regulator^F136] ); or

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

(3) The administrator shall be taken to comply with sub-paragraph (1)(d) if the administrator publishes in the prescribed manner a notice undertaking to provide a copy of the statement of proposals free of charge to any member of the [^F124investment^F124] bank who applies in writing to a specified address.

(4) 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 which applies in writing to a specified address.

(5) Sub-paragraphs (7) and (8) of paragraph 49 of Schedule B1 apply with the following modifications—

(a) the reference in paragraph 49(7) to sub-paragraph (5) shall be a reference to sub-paragraph (2) of this paragraph;

(b) the reference to “this paragraph” in paragraph 49(8) means this paragraph;

(c) the reference to paragraph 107 is a reference to that paragraph as applied by section 145 of the Act and by paragraph 6(3).

Meeting of creditors and clients to approve statement

10.—(1) This paragraph applies after the administrator has sent the statement of proposals to the persons listed in paragraph 9(1) unless (subject to sub-paragraph (6)) [^F137a regulator^F137] has given a direction under regulation 16 and the direction has not been withdrawn.

(2) Paragraph 50 of Schedule B1 applies save that—

(a)in sub-paragraph (1), the administrator shall invite the clients to the meeting of creditors and the clients shall be given the prescribed period of notice under sub-paragraph (1)(b); and

(b)the [^F138FCA and, where the investment bank concerned is a PRA-authorised person, the PRA^F138] may appoint a person to attend a meeting of creditors and make representations as to any matter for decision.

(3) Paragraph 51 of Schedule B1 applies save that—

(a)the reference to paragraph 49(4)(b) is to paragraph 9(1) of this Schedule; and

(b)each copy of the statement sent to a client or to [^F139a regulator^F139] under paragraph 9(1) of this Schedule must be accompanied by an invitation to the initial creditor's meeting.

(4) Paragraph 53 of Schedule B1 applies save that in sub-paragraph (2), if [^F140FCA or, where the investment bank concerned is a PRA-authorised person, the PRA^F140] has not appointed a person to attend the meeting, the administrator must also report any decision taken to [^F141that regulator^F141] .

(5) If the meeting of creditors is unable to approve the statement, the administrator may apply to court for an order dispensing with the need for the approval of the meeting of creditors, and paragraph 14 applies.

(6) Where, before [^F142a regulator^F142] gives a direction under regulation 16, a meeting of creditors has already approved the statement under this paragraph, when [^F143that regulator^F143] gives its direction a new statement shall be drawn up in accordance with paragraphs 7 to 9 to replace the statement that has already been approved.

[^F144 (7) For the purposes of this paragraph—

(a)paragraphs 51 and 53 of Schedule B1, as applied by this paragraph, have effect without the amendments of those paragraphs made by paragraph 10(4), (5) and (8) to (10) of Schedule 9 to the Small Business, Enterprise and Employment Act 2015 (further amendments relating to the abolition of requirements to hold meetings);

(b)ignore paragraph 10(3) of Schedule 9 to that Act (omission of paragraph 50 of Schedule B1).^F144]

Revision to the statement of proposals (Objective A not yet achieved)

11.—(1) This paragraph applies where—

(a)the administrator's statement has been—

(i)agreed with the Bank of England (or the court has made an order dispensing with the need for this agreement under paragraph 8(2)), and

(ii)approved by the meeting of creditors (or if the court has made an order dispensing with the need for this approval under paragraph 14);

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

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

(d)the Bank of England has not given the Objective A Achievement Notice.

(2) The administrator shall agree the revised statement with the Bank of England and, where [^F145a regulator^F145] has given a direction and it has not been withdrawn, with [^F146that regulator^F146] .

(3) Paragraph 8(2) to (6) shall apply where the administrator is unable to agree a statement with the Bank of England or (as the case may be) with [^F147FCA or, where relevant, the PRA^F147] .

(4) Once the revision has been approved by the Bank of England (and, as the case may be, with [^F147FCA or, where relevant, the PRA^F147] ) or, if the court has made an order dispensing with the need for those approvals, paragraph 54(2) to (5)(a) of Schedule B1 applies in respect of the revised statement save that—

(a)if the administrator thinks that the proposed revision affects both creditors and clients, then every reference in paragraph 54 to creditors includes clients;

(b)if the administrator thinks that the proposed revision only affects either creditors or clients, then paragraph 54 only applies in respect of the affected party,

and where sub-paragraph (b) applies, the party not affected must be informed of the proposed revision in a manner prescribed.

(5) In sub-paragraph (2) of paragraph 54, where [^F148neither regulator has^F148] given a direction under regulation 16, the [^F149FCA and, where the investment bank concerned is a PRA-authorised person, the PRA shall^F149] be sent a copy of the statement of the proposed revision and invited to appoint a representative to attend the creditors' meeting.

(6) The FSCS shall be sent a copy of the statement of the proposed revision.

(7) If the meeting of creditors is unable to approve the statement, the administrator may apply to court for an order dispensing with the need for the approval of the meeting of creditors, and paragraph 14 applies.

(8) Where the administrator makes an application under sub-paragraph (7), sub-paragraphs (6) and (7) of paragraph 54 shall apply.

[^F150 (9) In this paragraph a reference to paragraph 54 of Schedule B1 is a reference to that paragraph as applied by regulation 15.^F150]

Revision to the statement of proposals (Objective A achieved and no [^F151regulation 16^F151] direction)

12.—(1) This paragraph applies where —

(a)the events in paragraph 11(1)(a) to (c) have occurred;

(b)the Bank of England has given the Objective A Achievement Notice; and

(c)[^F152 no direction has been given^F152] under regulation 16, or if it has, that direction has been withdrawn.

(2) Paragraph 54 of Schedule B1 applies in respect of that statement save that—

(a)if the administrator considers that the proposed revision affects both creditors and clients, then every reference in paragraph 54 to creditors includes clients;

(b)if the administrator considers that the proposed revision only affects either creditors or clients, then paragraph 54 only applies in respect of the affected party,

and where sub-paragraph (b) applies, the party not affected must be informed of the proposed revision in a manner prescribed.

(3) In sub-paragraph (2) of paragraph 54 the [^F153FCA and, where the investment bank concerned is a PRA-authorised person, the PRA^F153] shall be sent a copy of the statement of the proposed revision and be invited to appoint a representative to attend the creditors' meeting.

(4) The FSCS shall be sent a copy of the statement of the proposed revision.

[^F154 (5) In this paragraph a reference to paragraph 54 of Schedule B1 is a reference to that paragraph as applied by regulation 15.^F154]

Revision to the statement of proposals (Objective A achieved and [^F155regulation 16^F155] direction has not been withdrawn)

13.—(1) This paragraph applies where —

(a)the events in paragraph 11(1)(a) to (c) have occurred;

(b)the Bank of England has given the Objective A Achievement Notice; and

(c)[^F156 a regulator^F156] has given a direction under regulation 16 and the direction has not been withdrawn.

(2) The administrator shall agree the revised statement with [^F157that regulator^F157] .

(3) Paragraph 8(3) to (6) shall apply where the administrator is unable to agree a revision to the statement with [^F158that regulator^F158] .

(4) After the revision to the statement has been agreed with [^F159that regulator^F159] , or if the court makes an order under paragraph 8(4) 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 statement free of charge to any member of the investment bank who applies in writing to a specified address.

(6) A notice under paragraph (4) 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.

Powers of the court

14.—(1) Where the administrator makes an application to the court under paragraph 10(5) or 11(7), the court may—

(a)make the order, if it considers that the proposals set out in the statement are likely to achieve Objective A whilst not preventing the achievement of the special administration objectives;

(b)adjourn the hearing conditionally or unconditionally; or

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

(2) Where the court makes an order, the administrator shall as soon as reasonably practicable send the order to the registrar of companies and to such other persons as may be prescribed.

(3) Paragraph 54(7) of Schedule B1 applies as if the reference in that paragraph to sub-paragraph (6) were a reference to sub-paragraph (2) of this paragraph.

Ending of special administration (bank administration) (rescue)

15.—(1) This regulation applies if—

(a)the Bank of England has given an Objective A Achievement Notice; and

(b)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 sub-paragraph (2) must send a copy to the [^F160FCA and, where the investment bank concerned is a PRA-authorised person, the PRA^F160] .

Ending of special administration (bank administration) (dissolution or voluntary arrangement

16.—(1) This section applies if—

(a)the Bank of England has given an Objective A Achievement Notice;

(b)the administrator believes that Objectives 1 and 2 have been sufficiently achieved; and

(c)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 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—

(a)in section 3 (summoning of meetings), subsection (2) (and not (1)) applies;

(b)^F161the action that may be taken by a court under section 5(3) (effect of approval) includes suspension of the special administration order; ...

[^F162 (ba)sections 2 to 6 and 7 ^F163... have effect without the amendments of those provisions made by paragraphs 2 to [^F164 8^F164] 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); and^F162]

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

Interpretation

17. In this Schedule—

• “bridge bank” is a company wholly owned by the Bank of England to which all or part of the business of an [^F124 investment ^F124] bank may be transferred in accordance with section 12 of the Act;

• “ residual bank ” means the non-sold or non-transferred part of the [^F124 investment ^F124] bank which remains after a power in section 11 (sale to private sector purchaser) or section 12 (transfer to bridge bank) of the Act has been exercised in respect of that bank;

• “ Objective A ” has the meaning set out in paragraph 3(1)(a);

• “ Objective A Achievement Notice ” has the meaning set out in paragraph 3(3);

• “ private sector purchaser ” means a commercial purchaser to whom part of the business of the [^F124 investment ^F124] bank is sold to in accordance with section 11 of the Act; and

• “ statement ” means the statement of proposals drawn up in accordance with paragraph 7.

Regulation 24

SCHEDULE 3 Application of these Regulations to limited liability partnerships

^M25 1. In this Schedule, “ the 2001 Regulations ” means the Limited Liability Partnerships Regulations 2001 .

2. These Regulations apply where the investment bank is a limited liability partnership subject to the following modifications.

3.—(1) Those provisions of the Insolvency Act, as applied and modified by regulation 15 of these Regulations, shall apply in respect of an investment bank formed as a limited liability partnership subject to sub-paragraph (2).

(2) Those provisions of the Insolvency Act set out in the Table in sub-paragraph (3) shall also apply with the modifications set out in sub-paragraph (3).

(3) The modifications are—

(a) those contained in regulation 5(2) of the 2001 Regulations (not including those in regulation 5(2)(f)); and

(b) any other modification set out in the Table.

4.—(1) The provisions of the Disqualification Act shall apply with the modifications set out in sub-paragraph (2).

(2) The modifications are–

(a) those contained in regulation 23 of these Regulations;

(b) those contained in regulation 4(2) of the 2001 Regulations; and

(c) that contained in Part 2 of Schedule 2 to the 2001 Regulations.

Application to Scotland

5. The provisions of the Insolvency Act listed in this paragraph are not applied to Scotland—

(a)section 167 (and Schedule 4);

(b)sections 185 to 187;

(c)sections 193 to 194;

(d)section 196 to the extent that that section applies to the specified devolved functions of Part 4 of the Insolvency Act;

(e)section 199;

(f)sections 206 to 215;

(g)sections 218, subsection (1);

(h)sections 242 to 243; and

(i)section 245.

Subordinate legislation

6.—(1) The following subordinate legislation shall apply as from time to time in force to investment banks that are limited liability partnerships in special administration and—

(a)in case of the legislation listed in sub-paragraph (2), with such modifications as the context requires for the purpose of giving effect to the provisions of the Insolvency Act as applied by these Regulations; and

(b)in case of the legislation listed in sub-paragraph (3), with such modifications as the context requires for the purpose of giving effect to the provisions of the Companies Act 2006 and the Disqualification Act.

(2) The legislation referred to in sub-paragraph (1)(a) is—

(a)^M26The Insolvency Practitioners Regulations 2005 ;

(b)^M27The Insolvency Practitioners (Recognised Professional Bodies) Order 1986 ;

(c)^M28The Insolvency Proceedings Fees Order 2004 ;

(d)^M29The Insolvency Practitioners Tribunal (Conduct of Investigations) Rules 1986 ; and

(e)insolvency rules.

(3) The legislation referred to in sub-paragraph (1)(b) is—

(a)^M30The Insolvent Companies (Disqualification of Unfit Directors) Proceedings Rules 1987 ;

(b)The Uncertificated Securities Regulations 2001;

^M31(c)^M32The Insolvent Companies (Reports on Conduct of Directors) Rules 1996 ; and

(d)^M33The Insolvent Companies (Reports on Conduct of Directors) (Scotland) Rules 1996 .

Regulation 25

SCHEDULE 4 Application of these Regulations to partnerships

^M34 1. In this Schedule, “ the 1994 Order ” means the Insolvent Partnerships Order 1994 .

2. These Regulations apply where the investment bank is a partnership subject to the following modifications.

3. In the application of these Regulations and the Disqualification Act to partnerships, unless the contrary intention appears, the following apply—

(a) references to companies shall be construed as references to partnerships and all references to the registrar of companies shall be omitted;

(b) references to shares of a company shall be construed—

(i) in relation to a partnership with capital, as references to rights to share in that capital, and

(ii) in relation to a partnership without capital, as references to interests—

(aa) conferring any right to share in the profits or liability to contribute to the losses of the partnership, or

(bb) giving rise to an obligation to contribute to the debts or expenses of the partnership in the event of special administration; and

(c) other expressions appropriate to companies shall be construed, in relation to partnerships, as references to the corresponding persons, officers, documents or organs (as the case may be) appropriate to a partnership.

4.—(1) The provisions of Schedule B1 as applied by regulation 15 apply in respect of a partnership but where a provision of Schedule B1 is listed in Table 1 below, that provision shall apply—

(a) as modified by Schedule 2 to the 1994 Order; and

(b) with the modifications set out in column 3 of Table 1,

instead of as modified in accordance with regulation 15.

(2) In the provisions referred to in the second column of Table 1, a reference to—

(a) a provision of the Insolvency Act is to that provision as applied by regulation 15 (subject to sub-paragraph (1));

(b) action includes a reference to inaction;

(c) the administrator means the administrator appointed under regulation 7;

(d) the court means the court as defined in regulation 2;

(e) the creditors' meeting has the meaning given by paragraph 50 of Schedule B1 (as applied by regulation 15);

(f) entering administration means entering special administration;

(g) a hire purchase agreement includes a conditional sale agreement, a chattel leasing agreement and a retention of title agreement;

(h) an insolvency order is to a special administration order;

(i) an insolvency petition means an application for a special administration order;

(j) insolvency proceedings means special administration;

(k) market value means the amount which would be realised on a sale of property in the open market by a willing vendor;

(l) the purpose of administration means the pursuit of the special administration objectives;

(m) partnership is to an investment bank;

(n) the partnership being in administration is to the investment bank being in special administration;

(o) a responsible insolvency practitioner is to the administrator;

(p) a thing in writing includes a reference to a thing in electronic form; and

(q) an inability to pay its debts has the meaning given in regulation 2(4).