Integrity Financial Solutions classed as an intermediary for FSCS purposes
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The Financial Services Compensation Scheme investment intermediation sub-class includes Integrity Financial Solutions, the geared Tep provider facing potential claims of £80m, as well as an assortment of wraps, structured product providers and investment companies.
A Freedom of Information request by Money Marketing, reveals the vast range of 6,500 firms which fall into the investment intermediation sub-class and which advisers would have to pay claims for in the event that they went bust.
The list includes wrap platforms, structured product providers, closed-book and open-book life insurance companies, geared traded endowment providers and many mainstream investment firms.
Yesterday, the FSA publicly censured Integrity Financial Solutions for failings in its role as a product provider and adviser of geared traded endowment policies.The liquidator of Integrity Financial Solutions, which went into liquidation last October, recently informed creditors it could face claims of £80m in a worst-case scenario. As at March 12, 2010 the FSCS had received 47 claims against Integrity, not all of these may be in relation to GTEPs, although it has not yet been declared in default.
Potential FSCS payouts are likely to be far lower than £80m due to the scheme’s £50,000 maximum for investment claims but could still be substantial.
Advisers have already been hit with an £80m interim levy following the failure of Keydata, a number of structured product providers and two stockbrokers.
An FSCS spokeswoman says: “Cross-subsidisation is one of the underlying principles of the FSCS funding system, which has been in place for just over a year and on which the industry was consulted.
“The FSA is currently reviewing the FSCS’s funding system. We urge all firms with an interest in this area to participate in the consultation.”
Aifa director general Chris Cummings says: “We are in close negotiations with the FSA about the effect of any further large claims hitting the sector. This list shows yet again the need for urgent reform of the FSCS to provide a fairer scheme.”
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Readers' comments (13)
Anonymous | 13 May 2010 9:02 am
I am sure we will be held responsible for things like the weather, sun spots,the war in Iraq and other such things in due course. And why not? We must be the easiest target on the planet next to motorists.
I sometimes wonder how many people are sharing that defective brain cell.
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Ian Mckenzie | 13 May 2010 9:05 am
I am fed up having to pay for the bad. Those responsible should be made to pay for their bad planning.
AIFA are a complete waiste of time. I could do their job. I just need to comment saying we need urgent reform. Heard it for the last few years. They have done nothing to fight back. We have to pay it on every occassion so what is the point of them. Or am I missing something.
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Ian | 13 May 2010 9:09 am
AIFA are a waiste of time. All they do is say reform required. They have said this for years and simply nothing gets sorted out. They have done nothing to fight back at FSA.
Why is it that our industry constantly accepts everything that the FSA say.
Why don't we form a self regulation. We could advise the marketplace it is because we feel the FSA has not worked as after 22 years of sorting our industry they have FAILED in their work. FSA please argue against that.
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Matt Kennedy | 13 May 2010 9:11 am
I believe that the principle of cross-subsidy is probably fair, but if it is to continue to be levied in sub groups, then categorisation is critical.
The FSA cannot keep authorising manufacturors of products in the intermediary space and not expect a backlash and continued legal action.
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Paul | 13 May 2010 9:11 am
If I was helping somone draw up a business plan, I'd strongly could at any point be asked to pay repeated additional "taxes" based on the actions of other businesses over which they have absolutely no control.
Its simply no good for the argument to be wheeled out that "the industry was consulted" -I very much doubt that advisers agreed that they should pay for the failings of regulators and product providers - if the questions WAS asked then they should publish the details of who agreed with that. Hannah - can you make a FOI request to get that info?
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Alan Lakey | 13 May 2010 9:15 am
How interesting, “Cross-subsidisation is one of the underlying principles of the FSCS funding system".
The RDR seeks to remove the cross-subsidies that have been a feature of the advice process since time immemorial.
The situation is crazy and, as always seems the case, logic flies out of the window once regulation sets off down the track.
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terry | 13 May 2010 9:19 am
I refer to the comment by Paul. I totally agree with him. Either advisers did not respond or did not realise the implications. The problem is that there is so much paperwork comes out from the FSA on consultations and other rubbish that the average IFA would have to employ somebody full time to analyse it all in depth and convert it to plain english that we all understand.
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Wayne Baber | 13 May 2010 9:28 am
It is ridiculous that Integrity are allowed to drop one company (bankrupt) and continue to operate in exactly the same markets and products under another name whilst we all have to foot the bill for their errors.
OK, i am sure that they will have to pay a couple of thousand pound of it like the rest of us, but THE SAME PEOPLE ARE STILL DOING THE SAME BUSINESS, just under another company. Should they not have to pay for their own mistakes with every penny that they have before the bill is shared round? That is the principle of FSCS cross-subsidy isn't it?
Otherwise, there is no personal penalty for failure. Carry in under another name whilst the rest of the industry pays.
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IFA Defence Union | 13 May 2010 9:32 am
This is unfair, unreasonable and illogical.
Anyone up for a challenge?
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Anonymous | 13 May 2010 10:20 am
http://www.oxera.com/main.aspx?id=4700
Go to this web site these are the people behind the FSCS funding set up.
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