The Investment Management Association has warned failure to reform the Financial Services Compensation Scheme could end up damaging the UK’s competitiveness as as a base for international fund management firms.
Speaking at the IMA chairman’s dinner in London last night IMA chairman Douglas Ferrans (pictured) also called for an independent review into the failure of Keydata and other recent investment firm failures, as revealed in Money Marketing this week.
Ferrans said that failures of investment firms over the last three years has cost the financial services industry almost £500m in compensation.
He said: “We understand of course, that the FSA cannot and does not run a no-failure regime. We support that. But the scale of recent failures – on a par with the Barlow Clowes scandal in the 1980s – cannot be ignored.
“There is a need for these events to be the subject of an independent review and for lessons to be learned. While we understand that legal and process issues may mean that such a review may not be able to start immediately, it will need to take place in due course and its conclusions must be published.
“It will then provide valuable lessons for the new Financial Conduct Authority to take on board as it starts its work.”
Fund managers paid £233m out of the £326m interim FSCS levy raised mainly to cover the cost of compensating Keydata investors, with advisers paying the remaining £93m.
Ferrans said the FSCS levy had a knock-on effect on the UK’s competitiveness.
He said: “Our regulators and legislators should be in no doubt about the impact that this episode has had not just in the UK but among global investment management firms around the world. Major firms may even now be developing plans as to where to locate their European operations. If there is no reform of the FSCS, this will become a big item in the column headed ‘not the UK’.”
Ferrans added: “Reform of the FSCS is a matter of urgency. I urge the FSA and the drafters of the forthcoming legislation on regulatory reform to make this a high priority.”