IFAs hit by £70m FSCS interim costs
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IFA firms who offer investment advice will be forced to pay the Financial Services Compensation Scheme an interim levy of £70m to cover the failings of Keydata, Pacific Continental and Square Mile.
Source: Michael Walter/Troika
Structured product provider Keydata will cost advisers £43m, while the failure of stockbrokers Pacific Continental and Square Mile will cost £27m.
Late last year Aifa announced it was taking legal advice over the FSCS’s decision to place the Keydata costs with advisers rather than providers.
IFAs are also likely to be hit hardest by an additional interim levy of £20m for claims made in respect of NDF Administration, Defined Returns and Arc Capital and Income.
The FSCS says it is currently consulting with the FSA and administrators to determine which sub-class pays but that it is likely to fall on investment advisers.
This would trigger a break in the £100m ceiling for the investment adviser sub-class with any overflows paid by the fund management sub-class.
Theses levies come on top of the £19m levy investment advisers will have to pay the FSCS for 2010/2011 and the £13.5m that life and pensions advisers will have to pay over the same period.
In contrast, the investment fund management sub-class will only be required to pay £3.5m, plus any overflows from the investment adviser sub-class. General insurance advisers are to be hit with a £20m levy to pay for PPI claims.
FSCS chief executive Loretta Minghella (pictured) also warns that more failures in the investment arena are likely to trigger further future costs.
She says: “In addition to these firms, we are continuing to see more failures coming to us in the investment area, and these are likely to impact further on our funding requirements later in the year.”
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Readers' comments (24)
Hugh Jeego | 12 Feb 2010 11:06 am
Bring on the election and lets get these morons on the dole ASAP.
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Gerry Cooper | 12 Feb 2010 11:09 am
So, once again, the majority have to pay for the mistakes, stupidity and greed of the few.
The bulk of Advisers did not and would not recommend these products.
Why the hell should we have to pay for the jerks who did, and furthermore, why the hell are we paying compensation to investors who bought products that the damned and doomed FSA should have policed and controlled more effectively.
Allright, I know, rhetorical questions, don't bother answering.
Pass the sick bag somebody
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Evan Owen | 12 Feb 2010 11:15 am
One day there will be one IFA left to pick up the tab for claims which can be made at any time in the future, there is no time limit.
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How funny!! | 12 Feb 2010 11:16 am
AND the woes go on ... and on ... and on ...
HERE'S a thought!! If all IFAs took a lengthy sabbatical then the FSCS levies and FSA fines would be aimed primarily at the banks, which are in the target zone for the Robin Hood Tax/liquidity issues/bonuses/etc.
Once they have gone under (and after all, they aren't too big to fail ... see Lehmans) then IFAs could reenter the arena as 'white nights' ... ...
HAHAHAHA ... ... OMG, sniffing the tippex bottle is getting to me again?? Or is it the b/s coming from Labour/the FSA??
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Peter Emery | 12 Feb 2010 11:19 am
I find this somewhat outrageous.
The FSA should spend far greater time ensuring that the products are robust and risk graded suitably. Small IFA's do not have any where near the resources of the FSA to undertake this task. However, as with split caps, when it ends in tears the IFA is the only one equiped to know that all the risks warnings were wrong. Any levy should fall on the providers. Why should the middle man carry the can for a manufacturing fault?
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Julian Stevens | 12 Feb 2010 11:19 am
If firms misadvised on these products, then their PI should cover any compensation due. If not, then why should everyone else be required to pay for the impact on investors of an institution failing? At this rate, people will be able to invest in pretty well any old thing in the knowledge that one way or another they can't lose. Shouldn't the providers themselves have been required to insure against failure? It's all gone completely crazy. The only bodies that never lose out are the regulators.
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roger holloway | 12 Feb 2010 11:19 am
Here we go again, it would appear that as we become more qualified, better informed and there are fewer of us we get further penalised for avioding products from what was originally a software company
Funny we avioded them,eh.
Strange time to buy structured products when the market has little headway to reach historical highs
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John | 12 Feb 2010 11:26 am
Yet more mistakes by the FSA being brought to the fore and for which the IFA community has to pay. WHEN WILL OUR COMMUNITY SIT UP AND DO SOMETHING ABOUT THIS OBSCENE AND OVERPAID QUANGO?
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Anonymous | 12 Feb 2010 11:31 am
Are all these cases just confirming that the FSA should have, and will have to, regulate the issue of all products coming to the market....
We must also ask how did these companies go into liquidation when we are supposed to be regulated and have sufficient capital adequecy to protect all.....
The words due dilligence and protection have been sadly lacking and now we are expected to pay for the shortcomings of poor regulation and monitoring.
The figures mentioned are more than most small IFA's can cover.
Mr Brown.....is it only Banks or are we all covered..unless you are a Greek Government...
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Anonymous | 12 Feb 2010 11:32 am
It makes perfect sense in the context of removing IFAs from the market
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