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Advisers hit out at ‘desperately unfair’ FSCS interim levy

Investment advisers are to be hit with an interim FSCS levy following the failures of Catalyst, Fyshe Horton Finney and Arch cru.

Advisers have branded the Financial Services Compensation Scheme’s decision to hit investment advisers with an interim levy of £29.5m as “desperately unfair”.

The FSCS said this week it expects to raise an interim levy of £29.5m on investment intermediaries before June 2014 as a result of the failures of life settlement firm Catalyst and stockbroker Fyshe Horton Finney, as well as increased compensation costs for Arch cru.

The FSCS says it expects costs relating to Catalyst to run into the tens of millions of pounds, and to span both the 2013/14 and 2014/15 levy years.

Other claims falling on the investment adviser class relate to Pritchard Stockbrokers, spreadbetting firm Worldspreads, and MF Global.

The FSCS has warned it may have to raise an interim levy on life and pensions advisers following the liquidation of former Harlequin Property distributor TailorMade Independent, but says costs are uncertain at this stage.

Pilot Financial Planning director Ian Thomas says: “This is desperately unfair. The advice industry is improving its professional standards and yet we are still picking up the tab for the sins of the past.

“I have no sense of connection to the businesses that created these issues.”

Apfa director general Chris Hannant says he is “disappointed” by the size of the levy.

He says: “This highlights the need for the FCA to look at the whole system for raising funds for compensation. Advice firms are under significant cost pressures and it is difficult for them to meet funding requests at short notice.”

Syndaxi Chartered Financial Planners managing director Robert Reid says: “The FSCS is taking the money off the wrong people. We are subsidising a bunch of failures.”

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Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. We can howl in protest ’til we’re blue in the face but unless and until the government sanctions the creation of an Independent Regulatory Oversight Committee to which to turn nothing’s likely to change.

  2. Very true Julian, however we must continue to shout loudly when injustice happens or no one will take any notice.

  3. Financial Advisers need to keep their own house in order and pay for the sins of other financial advisers.

    However, we should not be paying for the sins of pseudo product providers, stockbrokers and spreadbetting firms. These should be paid for by other pseudo product providers, stockbrokers and spreadbetting firms.

    I wonder if someone smart at MM can calculate what the FSCS levy would be if we were only required to pay for our own wrongs and not everyone elses?

  4. This is even worse than the article states – and everyone has missed the biggest and most fundamental point.
    It is that Catalyst was never authorised to deal with retail customers and never did so. They marketed the funds and prepared “recklessly misleading” financial promotions.
    Advisers were made to pay for KeyData on the grounds that they had intermediary permissions – so every single one of you ought to be asking why you are paying for the failings of a company which had no intermediary permissions and which should by any sensible interpretation of the rules be paid for under the provider funding class.
    Instead of being “disappointed” at the size of the levy – which would be considerably lower if the providers Catalyst and Arch cru were made to pay for their own failures – advisers would be better served challenging the FSCS to apply the losses to the provision funding class.

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