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FSCS braced for 20,000 claims as it puts Aaron companies in default

The Financial Services Compensation Scheme has declared the David Aaron Part- nership and David M Aaron Personal Financial Planners in default, opening the floodgates for claims.

Although some clients estimate they invested as much as £300,000 through the David Aaron businesses, the FSCS will only pay out a maximum of £48,000 for investment claims at a rate of 100 per cent of the first £30,000 and 90 per cent of the next £20,000.

The FSCS says it anticipates receiving around 2,000 claims relating to David Aaron’s firms and has set up a dedicated team to deal with the cases. It says most will be processed within nine months although claims “at the back of the queue” could take longer.

Default status means the FSCS is satisfied that the firms are unable or likely to be unable to pay claims made against them. Both firms traded as the David Aaron Partnership.

In November, Money Marketing revealed that the FSA had decided that a letter sent by the regulator to the IFA praising its marketing material was irrelevant to the miselling of precipice bonds.

The letter from the FSA’s standards division congratulated David M Aaron Personal Financial Planners on its product material for being “generally well designed and written and therefore useful to consumers”.

When the FSA banned the firm for misselling precipice bonds, it said the firm “failed to issue advertisements and financial promotions that were clear, fair and not misleading”.

Riach Independent Financial Advisers proprietor Bob Riach says: “The compensation scheme is there to protect the public but who pays for it? The other small IFA firms. This has happened far too often with limited companies and I think the directors themselves should be pursued or at least forced to provide security when they set up a company.”

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