Financial services firms and insolvency
Financial services firms and insolvency

The following Financial Services guidance note provides comprehensive and up to date legal information covering:

  • Financial services firms and insolvency
  • Financial services firms and insolvency provisions in FSMA 2000
  • Identify the firm’s appropriate regulator
  • Voluntary arrangements
  • Administration and receivership
  • Winding up and bankruptcy petitions
  • Debt avoidance and supplemental provisions for insurance contracts

Financial services firms and insolvency provisions in FSMA 2000

The provisions in Part XXIV of the Financial Services and Markets Act 2000 (FSMA 2000) allow the regulators to be involved in insolvency related proceedings against firms and individuals. These rights arise both in respect of authorised firms and recognised investment exchanges, as well as those conducting regulated activities in contravention of the general prohibition (FSMA 2000, ss 19–20). Each section in Pt XXIV indicates the parameters as to when rights accrue, in some cases rights accrue to more than one regulator. Seeking insolvency orders is an important process for the regulators, particularly against firms carrying out unauthorised business. Insolvency proceedings are used against insolvent firms and individuals as well as those which are not technically insolvent but where it would be just and equitable for the firm to cease business.

The sections in FSMA 2000 should be considered in the wider context of the reforms to the treatment of insolvent financial institutions introduced following the financial crisis, in particular:

  1. the special resolution regime under the Banking Act 2009 (BA 2009)—for information, see Practice Notes: Special resolution regime for banks and building societies—rationale, scope, application and interpretation, Special resolution regime options, Powers of the authorities under the special resolution regime and Safeguards for shareholders, creditors and counterparties under the special