The Investment Management Association has warned that failure to reform the Financial Services Compensation Scheme could force fund management firms to move their operations outside the UK.
Speaking at the IMA chairman’s dinner in London last week, IMA chairman Douglas Ferrans said the financial services industry has paid almost £500m to compensate investors in failed firms such as Keydata over the last three years.
Ferrans said FSCS reform is “a matter of urgency,” and claimed that unless the system is reformed it could have a knock-on effect on the UK’s competitiveness.
He said: “Our regulators and legislators should be in no doubt about the impact that this episode has had, not just in the UK but among global investment management firms around the world. Major firms may even now be developing plans as to where to locate their European operations. If there is no reform of the FSCS, this will become a big item in the column headed ’not the UK’.”
Ferrans echoed comments made by IMA director of wholesale Guy Sears, who in last week’s Money Marketing called for an inquiry into advisers who recommended Keydata products.
Ferrans said: “There is a need for these events to be the subject of an independent review and for lessons to be learned. While we understand that legal and process issues may mean that such a review may not be able to start immediately, it will need to take place in due course and its conclusions must be published. It will then provide valuable lessons for the new Financial Conduct Authority to take on board as it starts its work.”