FSCS adds structured bill to levy on advisers
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’Why should retailer have to stump up for manufacturing fault?’
IFAs have attacked the Financial Services Compensation Sch-eme’s final decision to hit investment intermediaries with an £80m interim levy, which now includes £22m of claims related to failed Lehman-backed structured product providers.
The FSCS confirmed this week that investment intermediaries will have to pay an £80m interim levy - £58m to cover claims for Keydata Investment Services and two failed stockbrokers and £22m to cover NDF Administration, Defined Returns and Arc Capital and Income claims.
The FSCS says the fund management community will not have to carry any of the costs as claims do not exceed the £100m sub-class threshold as £12m of the full year’s £110m levy relates to “management expenses” to operate the scheme.
The FSCS says Keydata did not manage money or have discretion over bond purchases after receiving funds and therefore its activities fall into the intermediation sub-class.
The FSCS has concluded that claims against the failed Leh-man-backed structured product providers should also fall on intermediaries after “analysis of their business activities”. A spokeswoman says: “It is very similar to the reason for the Keydata levy, in that the type of business that those firms do means they fall into that sub-class.”
Aifa is exploring “other aven-ues to have the decision over-turned” and is seeking further legal advice before considering its next steps.
The 2010/2011 FSCS levy on investment intermediaries will be £24m, although the scheme warns that there could be ano-ther interim levy if there are other market failures. Life and pension intermediaries will pay £11.5m.
Emery (IFA) Associates managing director Peter Emery says: “Why should the retailer have to stump up for a manufacturing fault? We have been sold down the river.”
Lowes Financial Management managing director Ian Lowes says: “The FSCS claims are predominantly arising as a result of literature failure so that falls on the provider. But they are saying providers are not providers, they are intermediaries. If they are intermediaries, who are the ones giving the advice?”
Long View principal John Blackmore says: “The FSA and the FSCS know full well that what they are doing here is plain wrong and they should be ash-amed of themselves.”
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Readers' comments (1)
Sam Caunt | 1 Apr 2010 12:16 pm
Invoice today - £4,600 straight off our bottom line today. Put another way, a one off cost that is 22 times the proposed cost of the increase in employers NI which has hit the headlines today.
Good job I have 4 days off to regain my sense of humour....
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