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
  • Examples of insolvency proceedings for unauthorised business
  • Additional context for financial services related insolvency provisions

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. 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 Pt XXIV measures are not new elements of FSMA 2000, although they have been changed since they were introduced. The insolvency regime in place was proven to be insufficient to deal with the sort of failures seen during the global economic crisis, which started in the second half of 2007. The tangled position of financial services firms as a quasi-utility, with a complex creditor base, unique assets and geographically diverse businesses, means that localised insolvency provisions cannot cope well with a real insolvency. This situation has been seen