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The Payment Services Regulations 2009

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Safeguarding requirements

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19.—(1) For the purposes of this regulation “relevant funds” comprise the following—

(a)sums received from, or for the benefit of, a payment service user for the execution of a payment transaction; and

(b)sums received from a payment service provider for the execution of a payment transaction on behalf of a payment service user.

(2) Where—

(a)only a portion of the sums referred to in paragraph (1)(a) or (b) is to be used for the execution of a payment transaction (with the remainder being used for non-payment services); and

(b)the precise portion attributable to the execution of the payment transaction is variable or unknown in advance,

the relevant funds are such amount as may be reasonably estimated, on the basis of historical data and to the satisfaction of the Authority, to be representative of the portion attributable to the execution of the payment transaction.

(3) Where the relevant funds in respect of a payment transaction exceed £50, an authorised payment institution must safeguard such funds in accordance with either—

(a)paragraphs (4) to (8); or

(b)paragraphs (9) and (10).

(4) An authorised payment institution must keep relevant funds segregated from any other funds that it holds.

(5) Where the authorised payment institution continues to hold the relevant funds at the end of the business day following the day on which they were received it must—

(a)place them in a separate account that it holds with an authorised credit institution; or

(b)invest the relevant funds in such secure, liquid assets as the Authority may approve (“relevant assets”) and place those assets in a separate account with an authorised custodian.

(6) An account in which relevant funds or relevant assets are placed under paragraph (5) must—

(a)be designated in such a way as to show that it is an account which is held for the purpose of safeguarding relevant funds or relevant assets in accordance with this regulation; and

(b)be used only for holding those funds or assets.

(7) No person other than the authorised payment institution may have any interest in or right over the relevant funds or relevant assets placed in an account in accordance with paragraph (5)(a) or (b) except as provided by this regulation.

(8) The authorised payment institution must keep a record of—

(a)any relevant funds segregated in accordance with paragraph (4);

(b)any relevant funds placed in an account in accordance with paragraph (5)(a); and

(c)any relevant assets placed in an account in accordance with paragraph (5)(b).

(9) The authorised payment institution must ensure that—

(a)any relevant funds are covered by—

(i)an insurance policy with an authorised insurer;

(ii)a guarantee from an authorised insurer; or

(iii)a guarantee from an authorised credit institution; and

(b)the proceeds of any such insurance policy or guarantee are payable upon an insolvency event into a separate account held by the authorised payment institution which must—

(i)be designated in such a way as to show that it is an account which is held for the purpose of safeguarding relevant funds in accordance with this regulation; and

(ii)be used only for holding such proceeds.

(10) No person other than the authorised payment institution may have any interest in or right over the proceeds placed in an account in accordance with paragraph (9)(b) except as provided by this regulation.

(11) Subject to paragraph (12), where there is an insolvency event—

(a)the claims of payment service users are to be paid from the asset pool in priority to all other creditors; and

(b)until all the claims of payment service users have been paid, no right of set-off or security right may be exercised in respect of the asset pool except to the extent that the right of set-off relates to fees and expenses in relation to operating an account held in accordance with paragraph (5)(a) or (b) or (9)(b).

(12) The claims referred to in paragraph (11)(a) shall not be subject to the priority of expenses of an insolvency proceeding except in respect of the costs of distributing the asset pool.

(13) Paragraphs (11) and (12) shall apply to any relevant funds which a small payment institution (or an authorised payment institution in relation to relevant funds of £50 or less) voluntarily safeguards in accordance with either paragraphs (4) to (8) or paragraphs (9) and (10).

(14) An authorised payment institution (and any small payment institution which voluntarily safeguards relevant funds) must maintain organisational arrangements sufficient to minimise the risk of the loss or diminution of relevant funds or relevant assets through fraud, misuse, negligence or poor administration.

(15) In this regulation—

“asset pool” means—

(a)

any relevant funds segregated in accordance with paragraph (4);

(b)

any relevant funds held in an account in accordance with paragraph (5)(a);

(c)

any relevant assets held in an account in accordance with paragraph (5)(b); and

(d)

any proceeds of an insurance policy or guarantee held in an account in accordance with paragraph (9)(b);

“authorised insurer” means a person authorised for the purposes of the 2000 Act to effect and carry out a contract of general insurance as principal or otherwise authorised in accordance with Article 6 of the First Council Directive 73/239/EEC of 24th July 1973 on the business of direct insurance other than life insurance(1), other than a person in the same group as the authorised payment institution;

“authorised credit institution” means a person authorised for the purposes of the 2000 Act to accept deposits or otherwise authorised as a credit institution in accordance with Article 6 of the banking consolidation directive other than a person in the same group as the authorised payment institution;

“authorised custodian” means a person authorised for the purposes of the 2000 Act to safeguard and administer investments or authorised as an investment firm under Article 5 of Directive 2004/39/EC of 12th April 2004 on markets in financial instruments(2) which holds those investments under regulatory standards at least equivalent to those set out under Article 13 of that directive;

“insolvency event” means any of the following procedures in relation to an authorised payment institution or small payment institution—

(e)

the making of a winding-up order;

(f)

the passing of a resolution for voluntary winding-up;

(g)

the entry of the institution into administration;

(h)

the appointment of a receiver or manager of the institution’s property;

(i)

the approval of a proposed voluntary arrangement (being a composition in satisfaction of debts or a scheme of arrangement);

(j)

the making of a bankruptcy order;

(k)

in Scotland, the award of sequestration;

(l)

the making of any deed of arrangement for the benefit of creditors or, in Scotland, the execution of a trust deed for creditors;

(m)

the conclusion of any composition contract with creditors; or

(n)

the making of an insolvency administration order or, in Scotland, sequestration, in respect of the estate of a deceased person;

“insolvency proceeding” means—

(o)

winding-up, administration, receivership, bankruptcy or, in Scotland, sequestration;

(p)

a voluntary arrangement, deed of arrangement or trust deed for the benefit of creditors; or

(q)

the administration of the insolvent estate of a deceased person;

“security right” means—

(r)

security for a debt owed by an authorised payment institution or a small payment institution and includes any charge, lien, mortgage or other security over the asset pool or any part of the asset pool; and

(s)

any charge arising in respect of the expenses of a voluntary arrangement.

(1)

OJ No L 228, 16.8.1973, p.3.

(2)

OJ No L 145, 30.4.2004, p.1.

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