View more on these topics

FSA agrees retail pool for FSCS claims

FSA Front 480

The FSA has decided to go ahead with proposals for providers to step in where advisers breach their annual Financial Services Compensation Scheme claims limit.

The regulator first consulted on its FSCS funding model review in July, which proposed a retail pool for Financial Conduct Authority firms which would be triggered if one class breached its annual claims limit. Under the original proposals, there would have been no cross-subsidy between Prudential Regulation Authority firms, such as banks and insurers, and FCA firms such as advisers and fund managers.

The FSA consulted again in January over how the retail pool would work, adding a new proposal that all providers would contribute to the retail pool where it is triggered by the failure of an adviser firm.

It has today confirmed it will proceed with the retail pool based on its second proposal.

Respondents to the January consultation argued the default position where a class breaches its annual claims limit should be to borrow money rather than levy the industry, and that pool contributions should be “clawed back” from the receiving classes in “non-distressed” years.

Concerns were also raised that one month was not a long enough consultation period given the second proposal was a significant departure from the first.

In response the FSA says: “We acknowledge the strength of feeling in the responses we received, but we were not persuaded the proposed model does not strike a reasonable balance between extending the funding capacity of the scheme while ensuring no sector is threatened by potentially unaffordable levies.”

It says providers’ maximum exposure to the FCA retail pool is “significantly less” than under existing rules.

The FSA argues there are also practical issues associated with borrowing or clawing back pool contributions.

On the issue of the consultation period, the FSA says: “We recognise the period was short, but we sought to engage key stakeholders in advance and a longer timescale would have jeopardised the legal certainty and operational readiness needed by 1 April.”

Under the new FSCS funding model investment advisers will have an annual claims limit of £150m, up from £100m under the previous system.

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com