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Law firm in bid for levy judicial review

Law firm Regulatory Legal has issued proceedings as a first step to launching a judicial review against the Financial Services Compensation Scheme’s £80m interim levy.

Documents will be submitted to the High Court this week and the law firm says it has 221 adviser firms signed up to help back the judicial review if it gets the go-ahead.

After issuing initial proceedings, Regulatory Legal says it will invite the FSCS to suspend collection of the levy, which is due to be paid by the end of April.

If the FSCS rejects this, it will ask the court to make an interim order preventing the scheme from collecting the levy, a move which would be likely to be contested by the FSCS.

A High Court judge will then decide whether Regulatory Legal has an arguable case and, if it does, the firm could proceed with the judicial review.

Regulatory Legal partner Gareth Fatchett says the judicial review would look to ascertain that the FSCS misunderstood the nature of Keydata’s activities when it allocated the costs of claims against the firm to intermediaries rather than providers.

Keydata claims made up a significant amount of the recent £80m interim levy to hit investment intermediaries which also included £22m of claims related to failed structured product providers and claims against two stockbrokers.

Fatchett argues that Keydata undertook activities which were more akin to those of the fund management sub-class.

He says: “It was clear that someone needs to challenge the decision in relation to Keydata. Our view is that for once the industry needed to stand up for itself. Win or lose, it is important to show the FSCS and the FSA that they do not have carte blanche to impose whatever they want without considering the effect on IFA firms.”

The FSCS says it will contest any judicial review. A spokeswoman says: “We see no reason why firms due to pay the levy should not comply with their regulatory obligations and do so in the usual way. We have explained the reasons for our decision to the industry and will explain our decision to the court at that time.”


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There are 11 comments at the moment, we would love to hear your opinion too.

  1. IFA Defence Union 29th April 2010 at 9:36 am

    Gareth asked us if we wished to be included as interested parties in a JR, I assume it was this one. We responded by asking for sight of the merits of the case, who is involved and the timescale.

    The autoresponder said he he is away on holiday until 10th May. Hope he has a nice time in Spain.

    We still need to see the merits.

    The 225 advisers need to ask how much they stand to lose.

  2. The FSCS like the FOS and FSA do not have to pay their legal fees… we (the Industry) pay them, so they have nothing to loose!
    Must be a nice position to be in … the F pack are an affront to fairness and common law, Oh and the Human rights act is not being breached is it Mr Brown? (So publish the legal opinion that the Information Commissioner has told you to)
    After last nights blunder, we know he does not know the truth if it smacked him in the face! IFA’s need to revolt!

  3. Incompetent Regulators Awards Team 29th April 2010 at 10:07 am

    Today seems to be the last date for payment for the FSCS interim bullsh*t payment. Maybe there is an argument for IFA firms to withold payment until court case is over! What’s others’ views on this?

  4. When the Legal & General received what it considered to be unfair treatment by the FSA it took the FSA to court. Although there was no outright winner the FSA had a somewhat embarrasing time and had to reduce the fine substantially. IFAs on their own cannot follow the Legal & General’s example but 221 of us have a chance of making a noise that the FSA will hear if nothing else. We hope to draw a line in the sand which the FSA will know that if they cross again we will not just lay down and pretend to be dead.

  5. FSCS Decision - Time to Challenge 29th April 2010 at 11:01 am

    Politicians take note – something is fundamentally wrong when the regulators act in this way.
    FSCS Decision – Time to Challenge

    All IFA firms will start to receive their FSCS bill in the next few days. The bill has to be paid in 30 days. If a challenge is being made then payment should be suspended.

    This is the finding of a compliance support group please take time to read this and remember this is not a radical anti regulation group:

    We made representations to the FSCS for our group members and awaited a response. The response seems to fly in the face of what every IFA believes.

    In these circumstances, we believe that even the apathetic will see merit in a challenge.

    A number of matters arising.

    1. We formally requested from the FSCS a copy of the documentation relating to the authorisation of Keydata. This was refused. We feel this documentation will explain why the FSA deemed Keydata to be in the same sub class as IFA firms.

    2. We pointed out that the distinction between a “provider” and an “intermediary” seems to have become blurred beyond the point of reality. We also produced evidence which referred consistently to Keydata as a provider.

    3. No-one in the industry really believes that Keydata was not a “provider”.

    Wider Issues

    1. There are many other products which by using the “Keydata analysis” could become part of a levy arrangement in the future. I cannot believe firms would want that.

    2. The industry should seek to review the process which led to this decision. A judicial review of the decision is supposedly supported by 80% of IFA firms.

    3. Will IFA firms simply wait until their representatives muster the backbone to actually do something ? The next 2 years sees the biggest change to the industry for a generation. Is this the time to be sending out a message that the industry is united ? We think so. If AIFA challenge then we will add our Members as Interested Parties to their action. If AIFA does not challenge then we will run the lead claim. In that way nothing is lost.

    4. I have time for the negotiation process followed by AIFA. That made sense. However, the reality is that a legal challenge is now the final option.


    1. FSCS Bills are due within 30 days (eg end of April).

    2. The Civil Procedure Protocol relating to Judicial Review requires a prescribed claim letter to be issued to the FSCS. This would need to be sent prior to the end of next week. To do this we need to note the interest of all parties affected by the “decision”. eg every firm in the Sub Class.

    3. We would need to issue proceedings by end of April 2010. As a firm, we need a statement from every single firm involved in this.

    4. This is a massive administration task which as a firm we will commit to.

    5. We are going to keep our group membership charge a nominal amount. The maximum a large firm would pay is £300 plus VAT. In context that is a small commitment. If firms cannot afford this commitment, then save doing everything for free (which will damage our business) then it is not worth doing.

  6. I wish Mr Fatchett and his firm every success. If they win, it could well mark the start of a series of legal actions, not least against the FSA over certain aspects of the RDR, including the massively inaccurate cost:benefit analysis on which it has decided to steam ahead regardless of many objections from the industry and its total disregard for the Statutory Code of Practice For Regulators (i.e. for the law of the land).

    And, if the FSCS should lose this action, then we sincerely hope it will be barred from meeting all costs awarded against it by way of another special levy against the industry (which is just the sort of thing we could expect it to try).

    Also, on just what grounds did the FSCS refuse to supply a copy of the documentation relating to the authorisation of Keydata? More regulator arrogance? Doubtless this will form part of Mr Fatchett’s evidence in presenting his case, hopefully to the detriment of the FSCS’ defence.

    This is, of course, all part of the “open and transparent” regulatory system of which the FSA like to boast on its website and we all know what a load of tripe that is.

    Let battle commence.

  7. Who is going to pay for the FSCS defence of this legal action?

    Regardless of the rights and wrongs of this particularly levy, I have a horrible feeling that this injunction and judicial review is going to result in us all paying a lot more to the FSCS in the future.

    It’s not as extreme as Gordon saying “I agree with David”, but on this occasion I find myself thinking “I agree with AIFA”.

    Perhaps the 221 adviser firms backing this legal action will agree to indemnify their peers from the extra costs recovered by the FSCS should their judicial review fail? No? I thought not.

  8. A Nuthernon E Mouse 29th April 2010 at 3:15 pm

    About time we stood up for ourselves!

  9. I have sympathy with Martin Bamford’s point of view and he is one of the good guys. However, I do feel that it is a bit like saying that we should not stand up to some other country that is going to invade these shores because they might treat us more harshly once they have defeated us. My concern is not so much Keydata, although that was painful enough, but the other companies which having failed will be classed as ‘intermediaries’.

  10. to martin bamford
    If they win their case will you contribute to the costs already incurred? No thought not.
    Think about what you are saying. You are advocating that, no matter whether it is right or wrong, just pay up and shut up, in case it ends up costing you more. It will anyway, when they start billing us for all the other failures not of our making.They can take liberties but they cannot take our FREEDOM to object..

  11. Thank you, Arthur. My view on this is that we should all object to the way in which the interim levy was calculated and applied to the IFA sector, but a judicial review is not the right way to object. In fact, legal action should always be the last resort. The only people who will be profit from this are lawyers.

    I genuinely believe that this whole unfortunate series of events has highlighted the unfairness in the calculation of levies for the compensation system. That should be enough to cause change. I think it will, without resorting to legal action.

    The fact that the FSCS will pass on their costs of defending this judicial review to the IFA community should the action fail is a bit like someone betting with your own money without your permission.

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