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Advisers will have to pay for trading firm’s FSCS claims

Contracts for difference and spread trading firm Global Trader Europe has been declared in default with the Financial Services Compensation Scheme saying up to 400 former customers may be eligible for compensation.

So far the FSCS has received 85 claims against the firm and the FSCS says it will treat these claims as a priority.

FSCS spokeswoman Sarah McShane says the default will fall on the investment intermediary class but it is unlikely that an additional levy will have to be raised.

She says: “Yes IFAs will be hit by this but it is a fairly standard default and we don’t think this will result in higher charges.”

This year, advisers have been hit with huge increases in FSCS costs due to misselling claims against stockbrokers Square Mile Securities Ltd and Pacific Continental Securities Ltd. Investment advisers, who sit in the same FSCS bracket as such firms, face a £44m levy this year compared to £9m the previous year.

Baronworth Investment Services director Colin Jackson says: “It seems unfair that the whole IFA community should foot the bill for things that are out of our control. Surely the scheme should be Government funded.”

In March the liquidator, Smith & Williamson, said segregated fund clients would receive up to 95 per cent of their positions as at February 15, 2008 when the company went into liquidation.

Smith & Williamson said it would distribute approximately £2m to the 160 segregated fund clients by the end of April, subject to any appeal or application.

Global Trader Europe went into administration on February 15, 2008 and creditors’ voluntary liquidation on June 17, 2008.

The firm does not have the money to pay claims against it, so the FSA declared it in default.

The FSCS says Smith & Williamson intend to pay a further dividend to creditors by the end of July. Once the FSCS receives confirmation of the amounts paid to customers by the liquidators, it will begin processing claims against the firm.

FSCS chief executive Loretta Minghella says: “Help is on the way for customers of Global Trader Europe. We are working closely with the liquidators and hope to make the first payments to customers of the firm shortly. You may be able to claim up to £48,000 if you have lost money from your dealings with the firm.”

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Comments

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

  1. Julian Stevens 24th July 2009 at 4:44 pm

    Advisers will have to pay for trading firm’s FSCS claims
    For advisers, the particularly galling thing about this is that we get lumbered with a share of the costs of compensating the customers of failed institutions of which we’ve never heard and which operate in areas totally different from those of the average IFA. If, when the Conservatives come to power and scrap the present regulatory system, one benefit of the new CPA could (we hope) be that advisers will be spared such manifest injustices. That aside, it would be interesting to know how long this particular organisation was on the slide before its ultimate failure. Were there no signs that the FSA ought to have identified sooner that should have triggered action to prevent what has now happened? Or is it another case of “Oh, s**t, we should have seen that one coming but, like so many before it, we didn’t”.

  2. Steven Farrall 24th July 2009 at 4:49 pm

    Replace Arbitrary taxation Levies with Specific Product Fee
    This is bonkers, and it has gone far enough. Why not simply apply an explicit levy to each investment or insurance product or transaction? This would build up a fund to meet these sorts of defaults. The client would see the price of consumer protection and could decide its value. Hence we could add, say, 2.5% to each of our invoices just like VAT but called, say, Consumer Protection Tax.

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