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£15M bill for advisers as another stockbroker goes bust

Advisers look set to be hit with a bill of up to £15m after another stockbroker, Square Mile Securities, was declared in default by the Financial Services Compensation Scheme.

This comes less than a month after the FSCS declared Pacific Continental Securities Limited in default, leaving advisers in the investment intermediary sub-class to pay compensation costs of between £40m and £70m.

The FSCS has already received 300 claims from former customers of Square Mile, and will be sending application forms to another 2,000.

The compensation scheme says it has included provision for the default in the 2009/10 levy estimate for the investment intermediaries’ sub-class, which jumped to £44m from £9m last year.

Director of claims Jonathan Clark says: “We recognise that this brings more unwelcome news for firms in the investment intermediary sub-class. We will be in a better position to clarify the potential costs once we start processing claims and will keep the industry informed of developments.

Informed Choice managing director Martin Bamford says: “We were all expecting this year to be pretty nasty but I cannot see the cost of the FSCS for investment advisers going down in the near future. I think it will continue to rise, depending on how the financial recovery progresses.”

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