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Commercial Secretary to the Treasury, Lord Sassoon, today set out proposals in a consultation paper for a new special administration regime to strengthen the UK鈥檚 ability to deal with any future failures of investment firms.聽

The government鈥檚 proposals will enhance the UK鈥檚 reputation as one of the world鈥檚 leading centres for conducting investment business and will ensure that the administration of an investment firm is conducted with due regard to clients, creditors and financial stability.

Lord Sassoon said:

Investment firms are a core part of the national and international financial system and play a critical role in providing market liquidity.

It is crucial to reduce the impact of an investment firm failure on the stability of the UK financial systems. The proposed new special administration regime will聽provide administrators with clarity and direction to manage a firm鈥檚 winding up in a way that is both less expensive and less disruptive.

The new regime will include new special administration objectives that will ensure that administrators focus on:

• the return of client assets
• engagement with market infrastructure bodies and the authorities
• maximising returns to creditors

The proposed new special administration regime is not expected to impose any additional regulatory costs on the private sector.

The Treasury has worked extensively with industry experts, the Bank of England and the Financial Services Authority (FSA) to develop the special administration regime and ensure that it is a balanced and proportionate policy response to any future failure of a major investment firm. Extensive consultation has been undertaken with industry on these new insolvency arrangements for investment firms.

Notes for editors

1. The paper, Special administration regime for investment firms, is the Treasury鈥檚 third consultation paper on enhancing resolution arrangements for investment firms.

2. The Treasury published an initial paper, titled Developing effective resolution arrangements for investment banks, in May 2009.聽This was followed by a further consultation paper, titled Establishing resolution arrangements for investment banks, in December 2009.

3. As part of the commitment to an open review, this paper, like the previous ones, has been developed in collaboration with an Advisory Panel of over 30 industry experts (as well as the Bank of England and FSA).

4. The government welcomes responses to the issues and questions raised in the paper by 16 November 2010.

5. The .

Non-media enquiries should be addressed to the Treasury Correspondence and Enquiry Unit on 020 7270 4558 or by e-mail to [email protected]

Media enquiries should be addressed to the Treasury Press Office on 020 7270 5238.