Financial Services Compensation Scheme chief executive Mark Neale says it is vital that the new funding model for the FSCS treats small businesses fairly and is supported by the industry.
During Neale’s evidence session before the joint committee on the draft Financial Services Bill last week, committee member George Mudie said the industry has legitimate concerns over the funding of the FSCS that need to be addressed.
Neale replied: “We think it is important that the industry funds us, but also that the funding arrangements command the maximum support within the industry. It is very important that the arrangements are fair and that they are fair to smaller businesses. They will certainly argue they would like to see the funding arrangements better reflect the risks different sectors of the industry pose.”
The FSA’s review of the FSCS’s funding model is currently on hold while European legislation on investor compensation schemes is finalised.
Neale told the committee it is “quite likely” the European legislative process will come to a conclusion before the end of the year and added that once it does, the review should be completed as quickly as possible.
In January, the FSCS announced a £93m interim levy for advisers, mainly to cover the cost of Keydata claims. About £58m of the previous year’s £80m interim levy was also related to the debacle.
Advisers argue the bill should not have initially fallen on the intermediary sub-class because Keydata was seen as a provider.
Philip J Milton chartered financial planner Philip Milton says: “I completely agree with Mr Neale. The increase in my firm’s levy from £6,000 to £55,000 for the default of a product we had never supported certainly cannot be considered fair to smaller firms.”