The Investors' Compensation Scheme is very concerned to set the record
straight on our agreement with Towry Law and others.
One of ICS' 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' 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
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's Brokers Talkback should have been: 'Should 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' mis-selling pension liabilities on the levy is
still to be determined and, in any event, does not influence this year's
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
Chief executive FSCS
on behalf of the ICS