Investment advisers' FSCS levies top £96m
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Investment advisers are facing a total Financial Services Compensation Scheme levy of up to £96m, following the collapse of stockbrokers Pacific Continental Securities and Square Mile Securities.
The FSCS has announced an indicative levy of £58m for investment advisers in 2009/10. It will initially levy firms £30m, with the additional £28m to be applied later in the year.
Investment advisers also face an interim levy of £38m for costs in 2008/09 relating to Pacific Continental and Square Mile Securities.
In its Plan and Budget: 2009/10 published in February, the FSCS estimated costs for investment advisers to be just £88m.
An FSCS spokeswoman says there is a possibility that further stockbroking firms will fall into default during the year, but the cost of those failures has been taken into account and factored into the figures.
She says: “We don’t expect any further costs to arise as a result of further defaults at this stage.”
The FSCS has confirmed that financial services firms will pay a general levy of £156m in 2009/10.
Banks will pay just under £406m to cover the estimated expenses of bank defaults to March 31, 2009.
FSCS chief executive Loretta Minghella says: “2009 brought two significant defaults in the investments area following the failures of Pacific Continental Securities and Square Mile Securities. We have now received almost 3,500 claims against the firms and have refined our earlier assumptions about the costs of claims against the firms both for 2008/09 and 2009/10. This has enabled us to fix the interim levy for 2008/09 and the first levy for 2009/10 for the investment intermediation sub-class.
“Whilst most sub-classes will see no change from the indicative levies we published in our Plan and Budget: 2009/10, we recognise that the levy comes at a very difficult time for firms. They can rest assured that we have taken steps to avoid over-levying and to contain our costs.”
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Readers' comments (1)
Glen McKeown | 19 Feb 2010 10:49 am
I've obviously misunderstood the process somewhere. I thought that one bought PI insurance before commencing trading in order to provide financial cover for problems arising from one's own trading. And one tried to do things correctly in order to keep the PI premium as low as possible.
If one is going to have to pay, after the event, for other peoples miss-trading, over which there is no control, then there appears to be a genuine incentive to take all one can as quickly as one can, and run.
As the prudent and conscientious adviser, and not the PI Insurer, is going to have to pay for heavily for the misdeeds of others then either fee levels must rise significantly (which would undoubtedly extend our services further into the less wealthy classes) or we treat Financial Services as a short term career break, take all we can, and disappear.
As much as I try, I cannot see a sustainable service model arising out of the current regulatory mess, RDR or no RDR. In fact I believe that RDR is more likely to break the system than make it, because it further increases costs without providing any guaranteed benefits to advisers or clients.
Indeed with yet another level of regulation there will be even more opportunities for clients to claim compensation, for good or bad reasons, which will necessitate further fee increases. This circle is not virtuous.
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