Regulation 36 Liability for forged dematerialised instructions, induced amendments to Operator registers of securities, and induced Operator-instructions
For the purpose of this regulation—
a dematerialised instruction is a forged dematerialised instruction if—
it was not sent from the computers of a system-participant or the computers comprising an Operator-system; or
it was not sent from the computers of the system-participant or the computers comprising an Operator-system (as the case may be) from which it is expressed to have been sent;
an act is a causative act if, not being a dematerialised instruction and not being an act which causes a dematerialised instruction to be sent from the computer of a system-participant, it unlawfully causes the Operator—
to make, delete or amend an entry on an Operator register of securities; or
to send an Operator-instruction to a participating issuer;
an entry on, deletion from, or amendment to an Operator register of securities is an induced amendment if it is an entry on, deletion from, or amendment to an Operator register of securities which results from a causative act or a forged dematerialised instruction; and
an Operator-instruction is an induced Operator-instruction if it is an Operator-instruction to a participating issuer which results from a causative act or a forged dematerialised instruction.
If, as a result of a forged dematerialised instruction (not being one which results in an induced amendment to an Operator register of securities or an induced Operator-instruction), an induced amendment to an Operator register of securities, or an induced Operator-instruction, any one or more of the following events occurs—
the name of any person remains on, is entered on, or is removed or omitted from, a register of securities;
the number of units of a security in relation to which the name of any person is entered on a register of securities is increased, reduced, or remains unaltered;
the description of any units of a security in relation to which the name of any person is entered on a register of securities is changed or remains unaltered,
and that person suffers loss as a result, he may apply to the court for an order that the Operator compensate him for his loss.
It is immaterial for the purposes of subparagraphs (a) to (c) of paragraph (2) whether the event is permanent or temporary.
The court shall not make an order under paragraph (2)—
if the Operator identifies a person as being responsible (whether alone or with others) for the forged dematerialised instruction (not being one which results in an induced amendment to an Operator register of securities or an induced Operator-instruction) or the causative act or forged dematerialised instruction resulting in the induced amendment to the Operator register of securities or the induced Operator-instruction (as the case may be) notwithstanding that it is impossible (for whatever reason) for the applicant to obtain satisfactory compensation from that person; or
if the Operator shows that a participating issuer would be liable under regulation 46 to compensate the applicant for the loss in respect of which the application is made, by reason of the participating issuer’s default in complying with, or contravention of, regulation 28(6).
Subject to paragraphs (6) and (7), the court may award to an applicant compensation for—
each forged dematerialised instruction (not being one which results in an induced amendment to an Operator register of securities or an induced Operator-instruction);
each induced amendment to an Operator register of securities; and
each induced Operator-instruction,
resulting in an event mentioned in subparagraph (a), (b) or (c) of paragraph (2).
The court shall not under paragraph (5) award to an applicant—
more than £50,000 for each such forged dematerialised instruction, induced amendment to an Operator register of securities, or induced Operator-instruction;
compensation for both an induced amendment to an Operator register of securities and an induced Operator-instruction if that induced amendment and that induced Operator-instruction resulted from the same causative act or the same forged dematerialised instruction.
In respect of liability arising under this regulation the court shall—
in awarding compensation only order the Operator to pay such amount of compensation as it appears to it to be just and equitable in all the circumstances having regard to the loss sustained by the applicant as a result of the forged dematerialised instruction, induced amendment to the Operator register of securities, or induced Operator-instruction;
in ascertaining the loss, apply the same rules concerning the duty of a person to mitigate his loss as apply to damages recoverable under the common law of England and Wales, Northern Ireland, or Scotland, (as the case may be); and
where it finds that the loss was to any extent caused or contributed to by any act or omission of the applicant, reduce the amount of the award by such proportion as it thinks just and equitable having regard to that finding.
An application to the court for an order under paragraph (2) shall not prejudice any right of the Operator to recover from a third party any sum that he may be ordered to pay.
An event mentioned in subparagraph (a), (b) or (c) of paragraph (2) shall not give rise to any liability on the Operator other than such as is expressly provided for in this regulation, except such as may arise from fraud or other wilful default, or negligence, on the part of the Operator.
Subject to paragraph (9), this regulation does not affect—
any right which any person may have other than under this regulation (not being a right against the Operator); or
any liability which any person other than the Operator may incur other than under this regulation.
Where an application is made under paragraph (2), and the Operator receives from the applicant a request for information or documents relating to—
a forged dematerialised instruction;
an induced amendment to an Operator register of securities; or
an induced Operator-instruction,
in respect of which the application is made, the Operator shall, in so far as he is able, and in so far as the request is reasonable, within one month give the applicant the information and documents.
The applicant shall, in so far as he is able, within one month give the Operator such information or documents as the Operator reasonably requests in connection with an application under paragraph (2) with respect to—
steps taken by the applicant to prevent the giving of any forged dematerialised instruction (whether of the kind referred to in paragraph (2) or of any other kind); and
steps taken by the applicant to mitigate the loss suffered by him,
provided that the applicant need not give information or documents pursuant to this paragraph until the Operator has complied with any request made by virtue of paragraph (11).
Neither the Operator nor the applicant shall be required to disclose any information by virtue of, respectively, paragraph (11) or (12) which would be privileged in the course of civil proceedings, or, in Scotland, which they would be entitled to refuse to disclose—
on grounds of confidentiality as between client and professional legal adviser in proceedings in the Court of Session; or
on grounds of confidentiality of communications made in connection with, or in contemplation of, such proceedings and for the purposes of those proceedings.
The jurisdiction conferred by this regulation shall be exercisable, in the case of a participating security constituted under the law of England and Wales, or Northern Ireland, by the High Court; and in the case of a participating security constituted under the law of Scotland by the Court of Session.