Following a Freedom of Information request by Money Marketing, the FSA has released the list, including an array of wrap platforms, geared traded endowment providers and structured product providers.
Of immediate concern is the inclusion of Integrity Financial Solutions, the geared traded endowment provider whose liquidator recently warned could face potential claims of £80m in a worst-case scenario.
Although potential FSCS payouts would be far lower, due to the individual cap on claims of £50,000, this firm could be one of a number of new disasters to hit the sector.
The list also includes some investment firms, pension companies and offshore firms, adding to the sense of confusion and lack of transparency around the current claim process.
At last week’s Building Societies Association conference, the BSA again highlighted the “moral hazard” of the FSCS’s levy which penalises lenders which rely mainly on retail funding.
FSA chairman Lord Turner has promised a review of FSCS funding which is expected to take place later this year.
The list of possible reforms includes a Tobin tax on transactions, a product levy and a debate on whether the share of responsibility between adviser and provider is fair.
The FSA could learn a great deal from taking a look at the world of medicine where the drug company takes on a bigger share of the responsibility for product failings compared with the doctor. Currently the intermediary carries far too much of the responsibility should a product fail and rectifying this misalignment should be a priority for the review.
When a manufacturer has failed through the design of the product or by failing to update the product or react to market developments, then the blame should not fall on the intermediary.
Similarly, when a regulator has failed to properly authorise or adequately supervise a firm, as was the case with Keydata, intermediaries should have to pay such a high price.
We have yet to hear from anyone in the industry who believes the system is fair. Whoever takes power in the aftermath of the general election, and whatever the future holds for financial services regulation, fundamental reform of the FSCS must be a priority.