View more on these topics

ICS deal over Towry Law was the best option

The Investors&#39 Compensation Scheme is very concerned to set the record

straight on our agreement with Towry Law and others.

One of ICS&#39 main concerns is to save the levy payer money in the event of

a company being unable to pay the claims against it and being declared in

default. This was the case with Advizas. In this situation, ICS was looking

at a burden on industry presently estimated at £48m.

The ICS deal has reduced that burden by a guaranteed amount – £13m.

There are other possible reductions to compensation costs, which would not

have been recov-erable in a liquidation situation, for example, a

third-party recovery worth up to £7m plus an amount equivalent to half

the proceeds of possible litigation by Towry Law.

The ICS will only be paying the claims of investors who are entitled to

compensation under its rules.

We have no doubt that Advizas is insolvent and unable to pay its claims.

As such, it can be declared in default under ICS rules. Without an

agreement, Towry Law could have simply walked away from the situation,

putting Advizas into liquidation. In this scenario, ICS&#39 recovery would

have been significantly reduced (potentially to zero) and levy payers would

face picking up the whole £48m tab.

We are in the business of minimising the burden on industry and ensuring

claimants have access to compensation when they need it. ICS took a

pragmatic approach when it was app-roached by Towry Law. If we had walked

away from this situation, we could have been criticised for not doing a

deal.

Levy payers would under-standably have been very upset to hear that we

could have significantly reduced the levy but failed to do so. Perhaps the

question on MM&#39s Brokers Talkback should have been: &#39Should the ICS try to

save the levy payer money in these circumstances?”

We looked at the situation long and hard, obtained a substantial

guaranteed recovery against the costs of compensation and came out with a

deal which will save the levy payers a substantial amountof money and which

required Towry Law and its executive directors to give warranties to ICS.

The agreement was the best option for levy payers and claimants.

The effect of Advizas&#39 mis-selling pension liabilities on the levy is

still to be determined and, in any event, does not influence this year&#39s

levy. The levy is unlikely to include these claims until at least 2002.

We will always try to resolve situations so as to reduce the burden on the

levy payer and would look at each case on its merits. This does not set a

precedent but indicates that ICS has an open door and will always take a

realistic approach.

Suzanne McCarthy

Chief executive FSCS

on behalf of the ICS

Recommended

Widows is the shock Isa leader

Autif hailed Scottish Widows as surprise champion of its first Isa fundtables last week but prompted controversy as several listed managersexpressed concerns over the figures&#39 market-sensitive nature. The tables, which rank Autif members by their unit trust Isa funds under management, show Widows towering over second-placed Fidelity with £2.17bn undermanagement. Fidelity, with £1.55bn under management, […]

Misys and Skandia in fund supermarket link

Users of Misys&#39s portal m-link will now have access to Skandia&#39s online fund supermarket, multifundshop, as the two companies announce a partnership. The deal covers Skandia&#39s MultiISA, MultiPEP and MultiFund, giving IFAs online access to over 200 funds. Skandia also says the two New Star funds, UK Growth and European Growth are exclusively available through […]

Hewitt blocks Lloyds TSB bid for Abbey

Lloyds TSB&#39s £18bn bid for Abbey National has been blocked by Tradeand Industry Secretary Patricia Hewitt for being against the publicinterest. The takeover was stopped after Hewitt accepted the conclusions ofthe Competition Commission which feared the merger would lead to higherprices and reduced innovation in the current account market.

Royal & Sun Alliance Luxembourg appoints funds sales manager

Royal and Sun Alliance Investments Luxembourg is appointing Shamik Cholera as retail and institutional funds sales manager for Switzerland as part of its expansion into the European market. Shamik joins from Barclays International Funds Group, where he was offshore sales manager, responsible for marketing products in Switzerland and Luxembourg.Shamik, who will report to sales director […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment