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FSCS Keydata legal bill hits £30m

The Financial Services Compensation Scheme is facing total legal costs of £30m in its attempt to recover compensation from advisers who recommended clients invest in Keydata.

This is close to half the £75m the FSCS said last year it expected to recover in Keydata compensation.

In a consultation paper published this week on FSCS management expenses, the FCA proposed a budget of £15.1m for major recoveries expenses for 2014/15, which includes a £7.2m budget for Keydata recovery costs.

It is on top of the £7.2m set aside for Keydata recoveries in 2012/13, as well as recovery costs of £7.7m in 2012/13 and £7.9m in 2011/12 for Keydata and other recoveries.

The consultation paper proposes an overall reduction in the FSCS management expenses levy limit of 15 per cent to £80m.

The MELL is the maximum amount the FSCS can levy in a year for management expenses. Management expenses are separate from compensation costs and are not included in the sub-class cap calculations.

The FCA proposes setting the MELL at £80m for 2014/15, which is made up of a minimum levy of £74.7m and a contingency reserve of £5.3m.

It compares with a total budget of £94.4m for 2013/14, which consists of a minimum levy of £74.4m and a contingency reserve of £20m.

Investment Quorum chief executive Lee Robertson says: “The FSCS is spending a huge amount of money on Keydata recoveries for what appears to be ever diminishing returns.”

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