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FCA agrees FSCS funding reform

The FCA has provisionally agreed a set of reforms to the Financial Services Compensation Scheme.

The regulator released a set of proposals for changing how the lifeboat fund is paid for late last year.

It put a number of specific ideas out to the market from its FSCS review, including collecting data from advisers on how many high-risk products they recommend and making structured deposit intermediaries pay for consumer FSCS protection.

It also asked the industry for its opinions on whether product providers should contribute to the FSCS and whether it could introduce mandatory wording on professional indemnity insurance policies for personal investment firms.

The consultation closed at the end of March this year.

Minutes for the FCA board’s July meeting, published last week, show the FCA executive committee was given a report on what the industry had said about the proposals in the consultation, and agreed with a recommendation that was presented to it.

It will revisit the reform package in October before setting out its final rules.

The minutes read: “Feedback from the consultation was provided in the board paper. The board agreed with the recommendation presented and noted that a policy statement and final rules would be published in the autumn.

“It was noted that the FSCS Funding Review would be considered further by the board in October.”

The FCA said it could not comment on what recommendation had been agreed to before the recommendations from the FSCS review return to the board for final approval in October.

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Comments

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

  1. For the UMPTEENTH time, the single biggest issue facing us, as far as our FSCS levies are concerned, is the quantum of liabilities it’s taking on, NOT how it’s funded. As we all know, this huge spike is almost entirely in respect of uninsured liabilities for the mis-selling of high risk and commonly unsuitable products such as UCIS.

    For the FCA now to be saying that it intends to start collecting such data is about as prime an example as it’s possible to imagine of locking the stable door long after all the horses have bolted.

    Instead of demanding information on UCIS sales, the FCA’s GABRIEL system asks inanely pointless questions such as How many complaints has your firm received about pet insurance? and What are the total premiums to all the pure protection policies effected via your firm? Of what value to the FCA or to anyone else are those sorts of data?

    And even if it does modify its widely reviled GABRIEL system to include such data, can we have any confidence that it will actually do anything with it? If it doesn’t, then what will be the point?

    With the industrial scale mis-selling of PPI, it’s not even trying to do that, preferring instead to spend £42.2m on some sort of campaign to encourage people to claim, including that appallingly cheesily scripted TV ad featuring a partial puppet of Arnold Schwarzenegger of which Spitting Image would have been ashamed.

    The FCA’s own website states: We aim to make markets work well – for individuals, for business, large and small, and for the economy as a whole.

    We do this by regulating the conduct of more than 56,000 businesses. We are also the prudential regulator for more than 18,000 of these businesses.

    Sorry guys but quite evidently you DON’T. Worse still, despite the mountain of evidence, you don’t even have the decency to admit it.

  2. The solution is simple. A product levy. Explicit in each Key Features Document. If you’re paying the levy you’re covered by the FSCS. If you are not paying the levy no FSCS cover if it all goes wrong. This will mean that investors will value the protection afforded by the FSCS, Advisers will emphasise it and those not paying for the cover will stop being subsidised by those who do. It will also dramatically reduce the “need” for advertising the FSCS.

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