The Financial Services Compensation Scheme has confirmed that extra claims of up to £33m which may be triggered by firms defaulting due to the FSA’s consumer redress scheme have not been factored into current levy estimates.
The FSCS last week confirmed its levies for 2012/2013 which will see investment intermediaries contribute £78m and life and pension intermediaries contribute £46m, with both sub-classes at risk of further additional costs.
Arch cru claims are split 70:30 between investment and pension intermediaries. The FSA’s estimate of up to £33m which could fall on the FSCS as a result of the redress scheme is likely to see the investment intermediary sub-class reach its limit of £100m, with additional costs passed to fund managers.
A spokeswoman for the FSCS says: “What we have given as an estimated amount in relation to claims against this firm does not relate to any figures the FSA has put out as part of its consultation on the consumer redress scheme.”
The FSA says the Financial Ombudsman Service has had about 250 complaints in relation to Arch cru distributors. Of these, around 60 have been passed to the FSCS. The FOS has issued decisions in 40 of the cases so far, of which 35 were upheld and five rejected. The remaining cases are still being considered by the FOS.
Thameside Wealth director Tom Kean says: “This has sinister overtones that echo back to the days of the pension review, and will wreak havoc with the professional indemnity insurers. The redress scheme will ruin some firms and depress others. This is a farce.”