Labour says urgent reform of the Financial Services Compensation Scheme should be considered as part of the forthcoming Parliamentary scrutiny of financial services regulation.
Late last year, the FSA announced that its planned review of the FSCS was to be put on hold due to the regulatory overhaul which will see the FSA replaced by the Prudential Regulation Authority and the Financial Conduct Authority.
The FSA has refused to commit to a timescale for consulting on FSCS reform. The consultation process will need to complete this year for reform to affect the 2012/13 levies.
But, speaking to Money Marketing, Labour Shadow Treasury financial secretary Chris Leslie says the upcoming legislative process for the proposed regulatory changes is “a perfect opportunity” to re-examine the FSCS.
He says: “You cannot look at conduct in financial services without asking whether the practices of the FSCS and Financial Ombudsman Service are appropriate. They are all part of the same thing.”
Leslie says he is likely to suggest amendments to the current FSCS funding model.
He says: “I want to hear directly from advisers and we are going to have pre-legislative scrutiny with evidence sessions, so perhaps the adviser community could come and give evidence.”
Two interim levies of £80m and £93m, mostly to pay for claims relating to Keydata, have caused huge anger among advisers. Investment managers are angry at having to pay a £233m levy.
Leslie says Aifa’s proposal for a professional advice sub-class is an “interesting idea” but warns that making sub-classes too small would magnify the impact of failures within them.
Aifa director of policy Andrew Strange says: “We welcome Chris Leslie’s comments as there is an urgent need to address some of the inherent, fundamental flaws which leave the current system unfit for purpose. We will make representations to MPs during the pre-legislative process, either through written or verbal evidence or our wider lobbying work.”
Forty Two Wealth Management certified financial planner Alan Dick says: “This is a welcome, positive step. I would like him to back Aifa’s suggestion for a professional advice sub-class.”
Eldon Financial Planning director Joss Harwood says: “The depth of feeling is unprecedented and if Leslie is prepared to do something that is great news.”