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Protests are growing against FSCS huge hike for fund firms

The 27m increase in the Financial Services Compensation Scheme levy on fund companies has provoked confusion and outrage throughout the industry.

The Investment Manage-ment Association is concerned that the massive hike will be unfair on the firms which have already paid into the FSA’s 194m settlement fund and will be now paying compensation twice.

Fidelity says the scale of the increase is unfair, especially for firms not directly involved in the split-cap debacle.

The FSCS says the levy rise is in anticipation of a company in the split-cap group going in default of the scheme. But splits’ firms say that the increase has come out of the blue, with the FSCS having received only a handful of claims.

M:Communications, the public relations company representing the 18 firms signed up to the FSA settlement says the compensation fund could be for splits’ firms not involved in the settlement. The FSA says there are four companies with splits’ liabilities that did not sign up to the agreement.

M:Communications spokesman Nick Miles says: “It is impossible at this stage to predict how many claims, if any, will be received for splits. The FSA announced that its investigation into the splits’ sector is over. Is it for funds not covered by the splits’ settlement? It is impossible to know what the FSCS is basing its assumptions on and the legitimacy of its calculations.”

IMA chief executive Richard Saunders is to meet with the FSCS to clarify reasons for the levy increase, although a date has not yet been set.

Saunders says: “The proposed levy is unfair on all fund management companies. We are concerned about the size of the increase and how it has been calculated, particularly given the FSCS’s own statement that ‘the allocation of splits’ claims is difficult to estimate until claims are received’.We are seeking further clarification from the FSCS.”

Fidelity managing director Richard Wastcoat says: “The huge increase in the levy for fund management firms is clearly unjust. Fidelity played no part in the split-cap investment trust scandal, yet, under this proposal, we would bear between 5 and 10 per cent of the total compensation costs.

“We accept the broad principle behind the scheme of good firms subsidising the bad but the scale of the subsidy is obviously unfair. This inequitable proposal cannot be left unchallenged.”

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