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FSA looking at adviser trusts to pay for misselling claims after industry exit

The FSA says advisers may be required to set up trusts to pay for any potential claims that arise after they have left the industry.

The idea is floated as part of the FSA’s review of prudential rules paper, published today, which it says is looking to ensure the “polluter pays” after leaving the industry.

The FSA says it has identified three possible options- a firm leaving authorisation in an “orderly fashion”, a trust set up at authorisation with adequate funds to be used when an adviser leaves the industry, or a combination of both.

The FSA says the trusts may run for six years after the adviser leaves the industry and that it is “exploring” whether after this period has expired any funds left over would be passed back to the individual.

In terms of leaving the industry in an orderly fashion, the FSA says an adviser could enter into a commercial arrangement to transfer the responsibility for future claims to another authorised person or leave resources within the firm.

The FSA says an arrangement could also be made for adequate capital resources to be left with an appropriate person who could then administer the funds, pay claims and distribute any surplus resources. It says this option would be more appropriate for firms looking to wind-up their businesses.

The FSA says any proposed changes in this area will be deferred by the regulator pending the outcome of the current banking and compensation reform and so there will be no formal consultation at this stage.


Watch out for traps

As macro economics dominates, it is no wonder that many clients will fail to see the benefits for them. It is clear that the Chancellor, if not the Prime Minister, hopes the proximity of Christmas will mean the main beneficiaries – those on lower incomes – will feel they can again spend and this infusion of cash into the retail sector will help the country get going.

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