Investor Compensation Act, 1998

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Approval of investor compensation schemes.

25.—(1) The supervisory authority may, following an application being made to it by an approved professional body and following consultation with the Company, approve of or refuse to approve of a proposal for the establishment of a compensation scheme to provide compensation in accordance with this Act for a specified category or categories of certified person.

(2) An approved professional body which has applied under subsection (1) shall be informed—

(a) whether or not the approval has been granted, within six months of the date of receipt of the application for approval, or

(b) where additional information in relation to the application for approval has been sought by the supervisory authority, within a period of six months after the receipt by the supervisory authority of the additional information, or the period of twelve months after the receipt of the application for approval, whichever is the sooner.

(3) The supervisory authority may impose conditions or requirements in relation to a compensation scheme for which approval has been sought under subsection (1) or which has been approved of under that subsection.

(4) Conditions or requirements imposed under subsection (3) may relate among other things to—

(a) the terms and conditions under which investment firms may participate in an investor compensation scheme,

(b) the amount of the contributions to be made by members of the compensation scheme, and

(c) procedures for the enforcement of compliance by members of the compensation scheme with the obligations to which they are subject by virtue of being members of the compensation scheme.

(5) An application for approval under subsection (1) shall be in such form and contain such particulars as the supervisory authority shall specify from time to time.

(6) A proposed investor compensation scheme shall not be approved of by the supervisory authority unless the approved professional body applying to establish the scheme satisfies the supervisory authority—

(a) that it will enable compensation to be paid to clients of investment firms in accordance with this Act,

(b) that the rules of the proposed scheme contain sufficient provisions so as to enable it to operate in accordance with this Act and in accordance with any conditions or requirements, or both, as the supervisory authority may impose,

(c) as to the probity and competence of each of the directors and managers or other responsible persons of the proposed scheme,

(d) that the funding arrangements to be put in place and the manner in which the proposed scheme is to be constituted are such that the scheme shall have reasonable provisions in place to provide for compensation for investors, and

(e) that the operation of the scheme is not likely to prejudice the operation of any other investor compensation scheme approved by the supervisory authority or of the investor compensation arrangements established by the Company.

(7) Whenever the supervisory authority refuses to approve of a compensation scheme in accordance with this section, it shall serve notice on the persons proposing the compensation scheme stating that it refuses to approve of the compensation scheme and setting out the reasons for that refusal in the notice and the persons proposing the compensation scheme may, within 21 days of receipt of such notice, appeal to the Court against the decision.

(8) The supervisory authority may, at any time prior to the grant or refusal of approval, request further information from the approved professional body or may instruct an authorised officer to make such inquiries or carry out such investigation as may be necessary for the purpose of evaluating an application under this section.

(9) Any proposed amendment of or addition to, as appropriate, the memorandum of association or articles of association or rules of a company operating an investor compensation scheme approved under this section or of the rules of such a compensation scheme shall not be made without the consent in writing of the supervisory authority, and the supervisory authority may approve of, or refuse to approve of, such amendment or addition as it thinks fit.

(10) The supervisory authority may require changes to be made to the memorandum of association or articles of association of a company operating an investor compensation scheme under this section or to the rules under which such a compensation scheme operates.