Compensation Arrangements

Compensation Arrangements

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.

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. 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.

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, and
  • a maximum of £2 million for all claims against one firm.

The LSB has approved the contribution structure, which has been designed to take a risk based approach to potential calls on the Compensation Arrangements, whilst at the same time taking into account the ability of firms to pay the contribution. All our authorised firms must make a contribution to the scheme as set out in our current fees.

The above information about the scheme should be read together with the:

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.

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.

If you require more information about the Compensation Arrangements, you should contact us at