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Advisers to be hit by more FSCS costs as Square Mile Securities defaults

The Financial Services Compensation Scheme has declared Square Mile Securities Limited in default and has estimated that compensation costs could reach up to £15m.

The FSCS has already received 300 claims from former customers of Square Mile, and will be sending application forms to another 2,000 who have expressed an interest in making a claim.

The FSCS 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.

The default comes less than a month after the FSCS declared Pacific Continental Securities Limited in default, paving the way for about 4,000 customers of that firm to claim compensation.

The FSCS estimates compensation costs for Pacific Continental to be between £40m and £70m.

FSCS director of claims Jonathan Clark says: “We also understand that more customers of the firm may have claims and we encourage them to contact us. We expect most of the claims against Square Mile Securities Limited to relate to either share misselling or the return of shares or cash held on behalf of customers.

“We recognise that this announcement brings more unwelcome news for firms in the investment intermediaries sub-class (D2). 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 and will provide more information as soon as we can. Providing a high quality compensation service benefits the industry by aiding consumer confidence.”

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