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FSCS levy fears at spread-bet firm Echelon default

Spread-betting firm Echelon Wealth Management went into default last week, raising concerns among intermediaries that the Financial Services Compensation Scheme levy for investment advisers may rise.

This follows the collapse of stockbrokers Pacific Continental Securities in January and Square Mile Securities in February, costing advisers 38m in additional FSCS levies.

An FSCS spokeswoman says it is too early to say if IFAs will face additional costs due to the default of Echelon.

Echelon went into liquidation in October 2008 and the FSCS says up to 900 customers could claim for compensation.

Thirty-five investors have already made a claim for compensation and the FSCS says they will be a priority. It adds that it expects to make the first compensation payments in June. Liquidators Smith and Williamson are working with the FSCS.

The FSCS will send application forms to Echelon customers by the end of June. Once the FSCS gets information from the liquidators, it will start processing claims.

FSCS chief executive Loretta Minghella says: “The FSCS is gearing up to help customers of Echelon Wealth Management Ltd. You may be able to claim up to 48,000 if you have lost money from your dealings with the firm. Once you receive a form, please return it to us so we can assess your claim.”

Highclere Financial Services partner Alan Lakey says: “I am really concerned that we could face more levies as a result of this default.

“Why is the IFA community paying for other people’s sins? There should be a product levy of, say, 1 per cent borne by the consumer and used to build up a fund for defaults like this.”

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At least I know what I won’t be writing about this week. I fear I may have mentioned a Bristol-based firm of advisers a shade too often of late – and while two columns in a row might reasonably be dismissed as coincidence, three looks like the journalistic equivalent of stalking.

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Short sighted

On a recent trip to Devon, I stayed in a small and rather delightful hotel run by an ex-City currency trader. One increasingly comes across ex-City or ex-financial services folk who have left the industry for one reason or another.

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