The FCA has published a consultation on proposals to hike the maximum compensation amount the Financial Services Ombudsman can require firms to pay.
Raising the maximum amount of compensation would see the cap increase from £150,000 to £350,000.
Adviser and wealth manager trade body Pimfa has already criticised the proposals arguing they could lead to fewer consumers receiving advice.
Pimfa chief executive Liz Field says: “We are deeply concerned that this proposed move could act as a barrier to entry for smaller firms as this will impact a firm’s ability to obtain professional indemnity insurance at a viable economic cost.
“This could reduce the number of firms within our profession and further widen the advice gap…Our profession has an essential role to play in helping to build a culture of savings and investments, and this move could severely impact firm’s ability to be able to provide this vital service to clients”.
The regulator has also confirmed it plans to extend access to the ombudsman to more small and medium-sized businesses.
This will allow a wider number of businesses to seek redress. SMEs will have to meet a turnover test and one of either a headcount or balance sheet total test.
Under previous rules, businesses had to meet all three points before they could take a claim as a business, not an individual, to FOS.
The announcement of what the FCA calls “near-final” rules comes less than three months after FOS chief executive Caroline Wayman told the FCA the complaints body was ready for new responsibilities.
Wayman said at a meeting in July that she was confident the FOS was ready to take on claims from small businesses, charities and trusts.
FCA chief executive Andrew Bailey says: “The changes are an important extension of the ombudsman service’s role and remit. We will work closely with them to ensure that they are ready, so that SMEs are able to benefit from new rules as soon as they come into force.”
Bailey adds: “We recognise it is vitally important for SMEs to have a mechanism to resolve disputes and we are clear the FOS is the right route for this.”