Advisers will have to pick up legal bill for pursuing Keydata IFAs
The adviser sub-class will foot the legal bill for pursuing IFAs who sold Keydata products while any recoveries will be paid back to fund management groups.
In the latest FSCS outlook, the scheme confirms that any costs attributable to Keydata recoveries will be paid for by the intermediation sub-class.
It adds: “Any net recoveries (that is, after costs) will first be allocated to the investment fund management sector up to the amount that sector contributed (in the interim levy). Any remaining recoveries will be applied to the investment intermediation sector.”
Claims relating to Keydata triggered FSCS levies for 2010/11 of £326m, with advisers having to pay £93m and fund firms £233m. Claims relating to SLS Capital made up the majority of an £80m FSCS adviser levy for 2009/10.
The FSCS recently instructed lawyers Herbert Smith to write to around 500 firms to start the legal process of trying to recover compensation claims paid out to Keydata SLS investors.
The outlook states the scheme’s continued operational expenses for 2011/12 are likely to be £11.85m more than originally projected - rising from £23m to £34.85 - due to a combination of fees associated with pursuing Keydata recoveries and bank facility fees for short-term liquidity funding for the FSCS.
Online reaction to the news of another Financial Services Compensation Scheme adviser levy
This cannot go on. There is clearly no incentive toward prudence. That is the lesson of all the debacles to date. We need to rethink the whole concept of investor compensation.
This is no joke. In the past, I have just got on with it and paid the bill I am faced with. Well, finally, my patience has snapped and I will be writing to my MP and asking him his opinion as something needs to be done, namely, who regulates the regulator?
My clients and myself cannot keep paying extra fees for this kind of collective responsibility. It is like financial fly-tipping.