The LIA is calling on all pro-viders which have used IFAs to distribute products which have then been subject to compensation payments to contribute to the subsidy of the Financial Services Comp-ensation Scheme.
Head of public affairs John Ellis believes providers which have been involved with the sale of products currently adding to the costs of the compensation scheme, for example, precipice bonds, should contribute to the subsidy and help IFAs meet their obligations.
FSA managing director David Kenmir says IFAs failing to meet their obligations face fines, interest on the outstanding amount or cancellation of their permission. He says a way forward will be found once the number of IFAs who do not pay is known.
On September 1, 3,777 invoices had been issued and 1,195 firms had paid in full.
Kenmir has met with Pass, the organisation used by providers to administer the cross-subsidy, to update it on the situation concerning the compensation scheme.
Ellis says he is keen for a definitive way forward to be found as soon as possible and has written to Kenmir asking him to clarify his position.
Ellis argues that it will be unfair if it turns out that a big number of IFAs pay the fees but some do not and an easier way is found for them. He believes the FSA should find a solution now that will be to the advantage of most IFAs.
He says there are two possibilities – either give IFAs more time to pay or require providers to commit more money to their subsidy.
Ellis says: “Anyone who uses the IFA distribution channel and is connected with anything that is now affecting the rise in compensation costs, for example, precipice bonds, should be part of the subsidy. If you depend on IFAs, then you should try and save them from extinction as it is in your interests. I would welcome the FSA putting pressure on providers to do so.”