MM Leader: Injustice of this unfair levy on advisers
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The Financial Services Compensation Scheme went even further in its attempts to offend natural justice last week, confirming that intermediaries will pay the full burden of claims relating to Lehman-backed structured product providers.
The FSCS also confirmed it was to ignore the rightful outrage that greeted its original decision to place the full burden of complaints against Keydata on to the investment intermediation sub-class.
The £80m interim levy on intermediaries is over half the £148m sum the FSCS expects the entire financial services industry to pay in levies for the 2010/11 financial year.
Placing this levy on intermediaries is unfair and unjust. Keydata portrayed itself as a product provider and that was the way the FSA let it market itself.
This episode was principally a failure of FSA regulation, yet it is IFAs who have to clear up the mess.
The FSCS’s argument centres on the activities of Keydata. The firm did not handle client money directly or have discretion over bond purchases after receiving funds. Investment management was outsourced to investment vehicles Lifemark and SLS Capital and so in the FSCS’s eyes Keydata’s activities were that of an intermediary.
The logical conclusion of this argument is that responsibility for a huge number of firms we would consider to be at the riskier end of the market, and well outside the usual definition of an intermediary, would fall on advisers. Who will advisers have to bail out next?
The FSCS’s decision regarding NDFA, Arc Capital & Income and Defined Returns Limited is equally outrageous.
Again, these firms were portrayed and regulated as product providers who dealt with IFAs. NDF Administration and Direct Returns Limited did not even have intermediation as one of their FSA permissions. Yet, as with Keydata, the FSCS has lumped them into the intermediation sub-class when it comes to paying out claims.
The bills for this unfair levy have begun landing on the doors of adviser firms which are already struggling with the financial crisis and the retail distribution review deadline.
Meanwhile, many of those behind the companies that sold these products move on to their next venture.
The FSA and FSCS should be ashamed of this decision, which shows a lack of judgement and understanding of a market which has had just about enough.
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Readers' comments (5)
Paul Harding | 8 Apr 2010 10:59 am
What I dont really get is that if eg Keydata were NOT a provider, and NOt handling client money, then clearly its not THEIR failure which has caused the money to be lost? So surely its the failure of the institution where the money was held that ought to dictate the category applicable?...and surely that shoudl only apply if the product was a structured DEPOSIT rather than an invesmtent product..? or are ALL these claims automatically being assumed to have been "bad advice" by an IFA firm - and if so wouldnt the claim be against the IFAs many of whom are still in business and so not even fall under FSCS remit yet??...surely its only "bust" IFAs claims that go to FSCS, and surely no clients are arguing that it was Keydata that gave them advice??......im baffled
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Mr Smug | 8 Apr 2010 10:59 am
Maybe whoever wrote this leader might like to form a rival body to AIFA? I'd join.
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Ron | 8 Apr 2010 3:52 pm
This industry is beyond belief, human rights do not exist here.
The public simply would not believe what is going on.
Our clients are being forced to pay for this, not us.
We do not need organisations in the format of AIFA, they need reducing to pure legal fighting machines, public PR machines and election funding.
If a few hundred pounds each produces 10s of millions of pounds, then we could afford to be a main sponsor of a political party, afford barristers to contest every dubious request and still have change to have good PR on radio, TV and in the press.
A simple format like the old small business forum, members vote on a subject and if it gets enough votes it is acted upon, except we could throw money behind it.
We are fighting the wrong type of battle in debates, we need to put power behind us and start punching our real weight, we are the industry, we are not a small part of it.
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Anonymous | 8 Apr 2010 5:16 pm
Join Adviser Alliance. If we join together we can fight this and other unfair diktats from the fsa.We need money to make our voice heard.
individually we do not have the kind of money and power this would take.In the words of one of the powerful institutions"Together we are stronger"Stop moaning and do the maths a few thousand of us pooling together a few hundred pounds each could make a difference.
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Anonymous | 14 Apr 2010 3:08 pm
We all disagree with the way we are being treated, but why are there 3 different institutions trying to get us all together to fight the likes of FSCS & FSA. Why don't you all join forces i.e. AIFA, Regulatory Legal LLP nd Advisor Alliance. You should all have one voice. Pool all the fees together and we can take on the fight.
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