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The Investment Bank Special Administration Regulations 2011

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EXPLANATORY NOTE

(This note is not part of the Regulations)

These Regulations provide for a new special administration regime for investment banks (as defined in section 232 of the Banking Act 2009 (c. 1)).

Regulation 3 gives an overview of the new regime.

Regulation 4 provides for the appointment of an administrator by special administration order.

Regulation 5 prescribes those who may apply to the court for a special administration order.

Regulation 6 sets out the grounds under which an application for a special administration order may be made.

Regulation 7 sets out the powers of the court when faced with an application for a special administration order.

Regulation 8 sets out 4 conditions that must be fulfilled before an investment bank can be put into other insolvency proceedings.

Regulation 9 provides that Schedules 1 and 2 apply where the investment bank is a deposit-taker.

Regulation 10 sets out the 3 special administration objectives and the duty on the administrator to achieve the objectives.

Regulation 11 (in respect of the first special administration objective) gives the administrator a power to set a bar date for the submission of claims over the client assets held by the investment bank, and provides for the treatment of claims received after the bar date and after a distribution of assets has taken place.

Regulation 12 (also in respect of the first special administration objective) prescribes how the administrator is to deal with a shortfall in the amount of client assets held by the investment bank in a client omnibus account.

Regulation 13 sets out details of the second special administration objective: that the administrator is to work with market infrastructure bodies to facilitate the operation of default rules and arrangements and the settlement of trades, and with the Authorities (the Bank of England, Financial Services Authority and the Treasury) to facilitate any actions the Authorities might take as a result of the special administration.

Regulation 14 provides for the continuation of certain supply contracts on the commencement of special administration.

Regulation 15 applies relevant provisions of the Insolvency Act 1986 (c. 45) with modification where necessary.

Regulation 16 provides a power for the Financial Services Authority (FSA) to direct the administrator to prioritise one or more of the special administration objectives where the FSA think it necessary to protect the stability of the financial systems of the United Kingdom or public confidence in the financial markets.

Regulation 17 provides for the drawing up of the statement of proposals in the event of the FSA having given a direction.

Regulation 18 provides for the revision of the statement of proposals in the event of the FSA having given a direction.

Regulation 19 provides for the revision of the statement of proposals in the event of the FSA having withdrawn its direction.

Regulations 20 and 21 provide for the ending of special administration.

Regulation 22 provides for a special administration order to be made as an alternative order to a winding up petition or an administration order under Schedule B1 to the Insolvency Act 1986.

Regulation 23 modifies the Company Directors Disqualification Act 1986 (c. 46) to apply in respect of special administration.

Regulations 24 to 27 provide that Schedules 3 to 6 have effect.

Schedule 1 modifies the new regime for use as an alternative to bank insolvency as set out in Part 2 of the Banking Act 2009.

Schedule 2 modifies the new regime for use as an alternative to bank administration as set out in Part 3 of the Banking Act 2009.

Schedule 3 modifies the new regime for limited liability partnerships.

Schedule 4 modifies the new regime for partnerships.

Schedule 5 lists the enactments referred to in the Regulations with their Northern Irish equivalents and any necessary modifications.

Schedule 6 sets out modifications and consequential amendments to legislation.

An Impact Assessment on the effect of the introduction of the new special administration regime has been prepared and may be obtained from the Financial Regulatory Strategy team, HM Treasury, 1 Horse Guards Road, London, SW1A 2HQ. It is also available on HM Treasury’s website (www.hm-treasury.gov.uk).

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