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FSA tells PI insurers not to rule out IFAs with split caps

The FSA says professional indemnity insurers should not refuse to cover IFAs simply because they have exposure to split-cap investment trusts.

Head of investment firms David Kenmir said the FSA is telling insurers they should not rule out covering firms just because of the type of business they have on their books.

He told Money Marketing last week that the FSA is willing to work with IFAs unable to get cover because of split-cap exposure.

Kenmir said that, depending on what exactly the exposure is, the regulator may be willing to turn a blind eye if a firm has only non-compliant PI cover.

But he added that this is not a blan-ket statement and that any relaxation of the rules would depend on how many split-cap cases that firms have on their books and how many complaints they have received.

Kenmir said: “We are talking to PI insurers about their position on split caps. We are explaining our whole strategy with firms and telling them about our complaint-handling procedures. We would also consider allowing firms with non-compliant cover to run with it if the reason they cannot get cover is because of split caps.”

Simpsons of Brighton partner Andrew Merricks says: “Allowing non-compliant cover obviously helps IFAs to trade. But it becomes irrelevant if its stops you trading because you go bust when you receive a split-cap complaint anyway.”

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