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Investment advisers face extra £28m in FSCS levies

FSCS Interior 480

Investment advisers are facing a total of £28m in additional Financial Services Compensation Scheme levies following the collapse of Pritchard Stockbrokers and spreadbetting firm Worldspreads.

More claims are also expected in relation to MF Global UK, Arch cru and Rockingham Independent.

In its Outlook newsletter, published last week, the FSCS has forecast a £25m interim levy on the investment intermediation class for 2012/13 due to higher than estimated compensation costs relating to Pritchard and Worldspreads.

Advisers within the life and pensions intermediation class are not facing additional levies.

The forecasted £25m interim levy on investment advisers is not expected to trigger the fund manager cross subsidy, which kicks in once adviser claims breach the annual £100m limit. The FSCS has so far levied £66m on investment advisers this year.

The FSCS expects to pay out £16m in 2012/13 in relation to Pritchard and £17m in relation to Worldspreads that has not been levied for. The compensation scheme has already paid out £20.6m to claimants in failed investment brokerage MF Global and expects to pay another £5m in 2012/13.

The FSCS has received 1,800 claims to date against 60 different IFAs to date who advised on Arch cru. Decisions on 350 claims have been made so far, with £5m in compensation paid. The FSCS says it expects more Arch cru claims this year and next year.

Claims against Rockingham, which was declared in default last month, are also being considered by the FSCS. The FSCS does not know at this stage whether it will be able to accept claims by Rockingham clients who invested in ARM.

Investment advisers are facing a further £3m in FSCS levies due to the resubmission of tariff data on which levies were based for 2010. The FSCS allowed firms to resubmit their tariff data after inconsistencies emerged about the way firms were reporting income.

As a result the FSCS has calculated a total of £71m was overpaid by firms. Recoveries from Norwich & Peterborough Building Society over its Keydata sales have left a shortfall of £36m to redistributed to the industry, with fund managers facing a a redistribution levy of £33m and investment advisers paying £3m.

Other classes facing an interim levy are general insurance intermediation and general insurance provision. GI brokers face an interim levy of £21m after there were more new payment protection insurance claims than expected and an increase in the average compensation amount per claim. The FSCS says two thirds of the PPI claims it receives come from claims management companies.

General insurers face an interim levy of £15m after higher payouts for mesothelioma and the collapse of Lemma Europe Insurance Company.

FSCS chief executive Mark Neale says: “It is important to note these levies are not set in stone, and the unpredictability of our business means the outlook could change.”


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There are 2 comments at the moment, we would love to hear your opinion too.

  1. FSCS chief executive Mark Neale says: “It is important to note these levies are not set in stone, and the unpredictability of our business means the outlook could change.”

    Which means presumably that, at the drop of an unaccountable hat, the levies could be increased to even higher and less reasonable levels.

    Good on ya, Mr Neale.

  2. John Milburn (Jigsaw) 20th January 2013 at 11:18 am

    There’s less investment advisers since RDR and the FSCS want us to pay more which many IFAs will deem it not worth staying in the industry. No long stop, more levies; I think it’s fair to suggest the FSA/FSCS want an end to advisers by pricing us out of the Industry. Such a shame since many clients value our service. Shame on the FSCS.

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