Why offer access to a Compensation scheme?

The insurance that a CILEx Authorised Entity is required to have does not cover all financial losses that a client might suffer. For this reason, we have a compensation scheme which is available for clients of our authorised firms and provides essential financial protection.

The information about the scheme should be read together with:

  1. The CILEx Regulation Compensation Arrangements Rules
  2. The CILEx Regulation Compensation Arrangements Guidance
  3. The CILEx Regulation Compensation Fund Fees

When can a client make a claim?

To be able to make a claim for compensation, clients must have suffered a loss because someone in the firm has dishonestly taken or wrongly used their money.

The schemes purpose is to relieve hardship, so payments under the scheme are discretionary and subject to meeting certain criteria.

When might a claim be refused?

A grant of compensation will not be made where the loss is suffered in certain circumstances such as where:

  • the loss is suffered by a medium to large sized business (as explained in the rules)
  • the client’s own financial circumstances mean that they will not suffer financial difficulty because of the loss
  • the firm was not authorised by us to carry out the sort of work it did for the client
  • the loss suffered can be recovered in some other way, such as by claiming on an insurance policy

A claim under the scheme may also be refused or reduced if it is felt that the client has contributed in some way to their loss.

What are the limits?

The CILEx Regulation Compensation Arrangements Rules set the limits to how much can be paid out. These are:

  • a maximum of £500,000 for one claim
  • a maximum of £500,000 for all claims against one firm

How much do I have to contribute?

All our authorised firms must make a contribution to the scheme as set out in our current fees.

If you require more information about the Compensation Arrangements, you should contact us at info@cilexcompensationfund.org.uk

How should I inform consumers about the Compensation Arrangements

Transparency Rules

The CILEx Regulation Transparency Rules (Transparency Rules) state that you must make clear the area(s) of law in which you provide legal services that you are authorised for, and whether the area(s) of law are covered by CILEx Regulation’s Compensation Arrangements.

As consumers assume all legal service providers are regulated, although they are not, you can emphasise your firms regulated status by emphasising the benefits of professional standards and consumer protections offered by possible access to the Compensation Arrangements.

Full details can be found at the Price and Service Transparency section of our website.

Supporting consumers

Consumers should first read our guide Accessing the Compensation Arrangements, to understand if they may be entitled to a payment under the scheme. This sets out whether they may be able to make a claim, the process they will need to follow and provides links to further guidance and rules that may impact on their eligibility. If a consumer wishes to submit a claim, then they can download the Compensation Arrangements Claim form.

In some situations, firms may have been regulated by a different regulator in the past. Where the event giving rise to a claim happened under that previous regulator, a claim against the Compensation Arrangements will not be possible.