FSCS funding review will look at how sub-classes are made up
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The FSA says the way that sub-classes of the Financial Services Compensation Scheme are made up will be scrutinised as part of the proposed review of FSCS funding.
Earlier this month, Informed Choice submitted an open letter and petition to FSA chief executive Hector Sants and Treasury financial secretary Mark Hoban, calling for urgent reform of the FSCS funding model. The petition closed with 678 signatures.
Sants responded to the letter last week, saying: “The investment intermediation sub-class was established when we last reviewed the FSCS funding model. It covers the activities of advising, arranging or dealing in investments.
“While firms in this sub-class may have different business models, we concluded that there was sufficient affinity between the firms to include them in the same sub-class. When we consult on the review of FSCS funding, we intend to discuss the composition of the classes.”
The FSA last reviewed the funding model in 2007. A new review was expected last year but has been postponed due to the upcoming restructure of UK regulation and possible changes at a European level.
Advisers have been calling for an urgent reform of FSCS funding for over a year, since the FSCS revealed it categorised Keydata as an intermediary rather than a provider.
On adviser liability for firms that sold a failed firm’s investment products, such as Keydata, Sants says: “We will take further regulatory action in respect of individual live distributor firms where we consider it appropriate.”
Informed Choice managing director Martin Bamford appreciates Sants taking the time to respond.
Bamford says: “Perhaps the best we can hope for now is a more effective regulator in the shape of the Financial Conduct Authority, taking earlier and more robust action where they identify emerging risks. I remain optimistic that we will eventually see reform when it comes to the funding of the FSCS.”
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Readers' comments (1)
Julian Stevens | 9 Mar 2011 9:40 am
Sorry to be negative, but I don't share Martin Bamford's optimism for reform of the way in which the way the FSCS is funded. The FSA has made plain that it wants to put off that review indefinitely and as yet has offered no comment on the (entirely reasonable) proposal of a product levy. Why not?
Also, I see no hope for the FCA being any different from or better than the FSA. It's going to be the same people operating from the same offices with the same "independence" from government, accountable to nobody but its own board (i.e. accountable to no one) and it'll probably still enjoy statutory immunity from prosecution. And, of course, it'll grant itself the same unilateral opt-out from the Statutory Code of Practice for Regulators (easy to find online and an easy read ~ how can a body created by Statute be allowed to exempt itself from a Statutory Code of Practice?).
The FCA will be just the same as the FSA and, according to Hector Sants, it's going to cost £50m just to change the sign over the door and the logo on its stationery. Will the NAO be doing anything about that? Don't hold your breath. It's just going to be more of the same old same old.
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