Aifa has called on the Financial Services Compensation Scheme to reveal the legal advice it received which led to investment advisers being saddled with the £43m Keydata levy.
It says the FSCS has confirmed it sought legal advice before allocating the costs of Keydata claims to the investment intermediation sub-class. Aifa says it is “imperative” this advice is published.
The FSCS has so far refused to say if it will publish the advice, although legal experts suggest it is unlikely to agree to Aifa’s request. Legal professional privilege protects the disclosure of certain communications between lawyer and client but this can be waived if it is deemed in the public interest.
Aifa is examining the competition implications of the levy and continues to challenge the decision, believing the fund management sub-class should shoulder the burden.
It believes a challenge could be brought against the FSA on the grounds of evidence of “a mindset of reckless indifference” within the regulator.
Due to their size, the majority of IFA firms will pay a levy far less than the average being paid by the 6,500 firms hit with the £70m levy for Keydata and failed stockbrokers Pacific Continental and Square Mile.
The amount payable will depend on levels of investment business written but Aifa calculations indicate the likely cost will be around £1,100 per full investment adviser. For a typical member, where investment exposure constitutes 40 per cent of business, it will be around £440.
Aifa director general Chris Cummings says: “We still believe this is a regulatory and supervisory failure, with Keydata inappropriately authorised by the FSA.
“In similarity to other recent failures, such as Pacific Continental Securities and Square Mile, Aifa believes the regulator should have stepped in far sooner.”
City law firm CMS Cameron McKenna partner Simon Morris says: “The FSCS will have taken very detailed legal advice before it proceeded to impose any part of the Keydata levy on intermediaries. If it is exceeding its powers, it is open to challenge. If it has acted lawfully, it would be exceedingly unlikely that any claim can be raised against the FSA.”
Conservative Shadow Treasury Financial Secretary Mark Hoban says: “People need to debate the levy and how it is funded. People need to think about the long-term implications and that is a debate people need with the regulator.”