Lehman investors could lose out under FSCS compensation
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Investors in Lehman-backed structured products may receive less compensation through the FSCS than they would have done through the FOS, says compliance consultant Adam Samuel.
Following structured product providers NDF Administration, Defined Returns Limited and Arc Income & Capital being placed in administration, the FSA says investors who lost money through their Lehman-backed plans may be entitled to compensation under the Financial Services Compensation Scheme. Until their collapse, complaints against the firms and potential payouts would have been handled by the Financial Ombudsman Service.
The FOS’s maximum payout is £100,000 but Samuel says: “There is a restriction on the FSCS payout which is about to go up to £50,000. The FSCS is not bound by the law and there have been cases where FOS has found in favour of the consumer and the FSCS has refused to pay up because it did not agree.”
Samuel says the FSCS offers a lower interest rate than the FOS and if the claim relates to an income plan, the FOS is unlikely to make a deduction for income that the plan has already paid out which has been spent by the client while he says the FSCS might do so.
He says: “It is not positive news for consumers and it is particularly bad news for advisers, because the FSCS have a track record of going after adviser firms.”
A FOS spokesman says: “If consumers are concerned they are going to lose out as a result of this then they should contact the consumer complaints’ division here and we will do our best to resolve this on a case-by-case basis.”
An FSCS spokeswoman says: “We are two separate organisations operating under a different set of rules. We are both part of the regulatory structure and we have different roles.”
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