The Financial Services and Markets Act 2000 (Rights of Action) Regulations 2001

Explanatory Note

(This note is not part of the Regulations)

These Regulations set out the circumstances in which a contravention of certain provisions of, or made or imposed under, the Financial Services and Markets Act 2000 (c. 8) (“the Act”) is actionable by a person who has suffered loss as a result of that contravention.

Regulation 4 prescribes the cases in which an action may be brought under section 20(3) of the Act against an authorised person who has contravened a requirement imposed under the Act. Such an action may be brought by a private person (as defined in regulation 3) or a person (“a fiduciary”) acting in a fiduciary or representative capacity on behalf of a private person where the remedy would be exclusively for the benefit of that person and the remedy could not be effected though action brought otherwise than at the suit of the fiduciary or representative. Contravention of a financial resources requirement imposed under Part IV of the Act is not actionable.

Regulation 5 provides that the definition of “private person” in regulation 3 applies for the purposes of section 71 of the Act. Under section 71(1) of the Act any private person who has suffered loss as a result of a contravention of section 56(6) of the Act (failure to take reasonable care to ensure that a function is not performed by a person in breach of a prohibition order) or section 59(1) or (2) of the Act (failure to ensure that controlled functions are performed only in accordance with approval granted by the Financial Services Authority (“the Authority”)) may bring an action. Any person who is not a private person may bring an action for contravention of those provisions only if he would bring the action as a fiduciary.

Regulation 6 provides that the definition of private person in regulation 3 applies for the purposes of section 150 of the Act. Under section 150(1) of the Act, contravention of a rule made by the Authority is actionable at the suit of any private person who has suffered loss as a result. Any person who is not a private person may only bring an action for contravention of a rule which prohibits the authorised person from seeking to make provision excluding or restricting any duty or liability; a rule that is directed at ensuring that transactions in investments are not effected with the benefit of unpublished information; or where the person would bring the action as a fiduciary.

Regulation 7 provides that any private person or person acting as a fiduciary may bring an action under section 202(2) of the Act in respect of a contravention of a requirement imposed by the Authority on an incoming firm under Part XIII of the Act. Contravention of a financial resources requirement imposed under Part XIII is not actionable.