(1) Subject to subsection (5) of this section, each authorised investment business firm (other than a person who does not provide investment business services) shall hold a bond in a specified form to the value of £50,000 or, in years subsequent to the first accounting year, 25 per cent, of turnover by reference to the previous accounting year, whichever is the greater.

(2) The bond referred to in this section shall provide that in the event of the inability or failure of the authorised investment business firm to meet its financial obligations in relation to any sums of money received by it from, or on behalf of, its clients, a sum of money will become available to a person nominated or approved of by a supervisory authority to be applied for the benefit of any client of the authorised investment business firm who has incurred loss or liability because of the inability or failure of the authorised investment business firm to meet such financial obligations.

(3) The person nominated or approved of by the supervisory authority shall, with the consent of the supervisory authority and up to such sum as may be specified by the supervisory authority, be indemnified out of the proceeds of the bond in respect of such reasonable expenses as are incurred in carrying out the functions provided for in subsection (2) of this section.