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FCA looks to extend FSCS payouts to larger firms

Larger unincorporated firms including charities could be in line for FSCS payouts.

The FCA is consulting on proposals to extend the cover offered by the Financial Services Compensation Scheme to larger unincorporated associations and large partnerships.

The proposals would see organisations such as charities eligible for the same FSCS payouts as consumers.

The FCA estimates the changes will apply to around 5,000 associations and 24,000 partnerships although it says any resulting increase in FSCS levies would be minimal.

The move follows the discovery that smaller organisations such as charities are set to be awarded compensation for lost deposits and investments following the collapse of Icelandic banks Kaupthing Singer and Friedlander and Landsbanki in 2008.

The consultation proposes firms will be able to claim on the FSCS if they do not exceed two of three criteria: a turnover of £6.5m, a balance sheet totalling £3.26m and 50 employees.

Currently firms are not able to claim through the FSCS if they have net assets in excess of £1.4m.

The Prudential Regulation Authority will now consult on extending the FSCS deposit remit to all unincorporated firms regardless of size.

FCA director of policy risk and research Christopher Woolard says: “Once it became clear that some organisations may have missed out on compensation, we acted to put that right and are now saying to anybody that thinks it may be eligible for help to get in touch with the FSCS.”

Yellowtail Financial Planning managing director Dennis Hall says: ”The FSCS model is broken as it is. Bringing more firms into scope before conducting a review of the whole system is a worry.”

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