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Advisers face interim FSCS levy


Advisers face a medium risk of an interim Financial Services Compensation Scheme levy this financial year due to additional costs associated with Arch cru and failed stockbroker Fyshe Horton Finney.

In April, the FSCS set the final levy for investment advisers for 2013/14 at £78m, up from an earlier estimate of £76m.

The FSCS’s August newsletter says the investment intermediation subclass is £1.2m short due to increased costs of compensating Arch cru and the collapsed stockbrokers Fyshe Horton Finney.

An FSCS spokeswoman says “it is too early to tell” if an interim levy will be necessary.

Anand Associates financial architect Bhupinder Anand says: “How can we budget for these things when they keep changing?

“Despite the recent rise we are seeing a general fall in adviser numbers, so there are fewer of us to eat the fee cake.”

The FSCS’s August newsletter also reveals that bondholders of Keydata subsidiary Lifemark, including the FSCS, will receive only 12 per cent to 15 per cent of capital before costs.

The FSCS is a principal bondholder of Lifemark bonds, after taking over investors’ rights when it paid out compensation to Lifemark investors. The FSCS was involved in rescue attempts to try and preserve more assets to return to investors and levypayers. However, bondholders voted to put Lifemark into liquidation in February 2012.

A Lifemark FSCS levy cost the industry £326m in 2011, with advisers paying £93m and fund managers paying £233m. Any money returned is likely to be rebated to the fund management sub-class.


The FSCS adds that over 1,000 Arch cru investors have already been compensated under the “interim payment” approach announced by the FSCS in April 2012.

The FSCS has also started compensating Fyshe Horton Finney clients after the stockbroker placed itself into special administration in March. Payments will be made to clients holding one account with an agreed total balance of £50,000.

The scheme has also paid out £1.6m in run-off insurance claims for failed Gibraltar-based property and liability firm Lemma Europe Insurance.

Some 760 outstanding covered claims worth £19m remain although the FSCS expects that “a proportion of those will be pursued”.

Last week, Money Marketing reported that Positive Solutions and Chase de Vere would be among lead case defendants in the FSCS legal challenge to recoup compensation paid to Keydata investors.

The newsletter says there will be six lead case defendants in all. It says: “The lead case defendants’ defences are expected in the coming months. Proceedings are stayed against all defendants not selected to be an LCD and a further case management conference is scheduled for February 2014.”

It also says there are fewer than 50 claims against MF Global remaining where a decision has to be issued. “We appear to be coming to the end of this default,” it says.

The investment intermediation sub-class previously had a maximum levy of £100m but that was raised to £150m FSA earlier this year.


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There are 2 comments at the moment, we would love to hear your opinion too.

  1. MIssold Investor 22nd August 2013 at 4:42 pm

    There could also be up to £50m unclaimed on mis-sold Lehman-backed structured products from NDFA, DRL and ARC. FSCS is known to have paid out on 13 of the 15 failed products so far, but only to those who have claimed. Hundreds of others may have been discouraged by the Sept 2010 FSCS announcement regarding ‘capital at risk’ plans. New evidence came to light in early 2011 and FSCS started quietly paying the few who made representations. Perhaps mindful of the levy, it looks like FSCS has chosen not to contact others with the same plans, despite having their contact details.

  2. It still seems to be that whatever organisation fails ~ banks, providers, stockbrokers and/or every other Tom, Dick or Harry ~ the blame is dumped on FS intermediaries, along with majority of the costs of compensating investors. ArchCru (fund manager), KeyData (provider), Lehman Bros (bank), all (according to the FSA) the fault of FSI’s for not having had crystal balls, not having done sufficient due diligence, not having adequately established suitability. There’s always something that the FSA grabs hold of to blame intermediaries (never itself admitting any sort of failings), which it then uses to pursue them, under threat of annihilation if they can’t or won’t pay up..

    The burning questions in the minds of so many firms suffering this relentless, flame-throwing onslaught must surely be:-

    1. What have we done to deserve this campaign of malicious persecution from the FSA?

    2. Why does the FSA ignore all the data showing that we’re 99% the good guys and that we pose the lowest degree of risk to consumers?

    3. Why is the FSA intent on destroying us?

    4. How, in the face of all the evidence, can the FSA continue to deny it has a pernicious agenda against small FS intermediaries?

    5. What good can the FSA possibly believe will come of exterminating the source of advice that most consumers have declared to be the one they trust most?

    6. How can those in positions of potential influence to redress this patently unjust misprioritisation of regulatory firepower continue to blame intermediaries to any meaningful extent for the poor esteem in which the FS industry is generally held? Can they not see that we’re manifestly NOT typical of the ills which afflict the industry?

    It’s a Kafkaesque nightmare and one from which there’s not even any escape by shutting up shop and going off to do something else or retiring. What have we done to deserve this kind of treatment?

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