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Treasury committee demands answers on FSCS levy reform

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Treasury committee chairman Andrew Tyrie has challenged the FCA’s smaller business practitioner panel to provide solutions to rocketing adviser bills for the Financial Services Compensation Scheme.

Tyrie’s comments came after Citywide Financial Partners director Clinton Askew, who also chairs the FCA’s smaller business panel, said his own firm’s FSCS bill increased by 300 per cent this year.

He said: “We had [FSCS chief executive] Mark Neale in front of the panel in September, and our view at the time was that the FSCS was insurance cover priced without reference to the underlying risk.

“There is an opportunity to step back and begin to think more widely about how consumers can be protected in these sort of circumstances.

“There are some structural issues [with the FSCS]. One of the problems [FSCS chief executive] Mark Neale has is that he can’t make recoveries from professional indemnity insurers because their contracts specifically write out claims from the FSCS, so in a way there are mechanisms that could alleviate some of the problems for advisers.”

However, Tyrie challenged Askew to develop specific reform options for policymakers to consider.

He said: “We are hearing the moaning and we can be sympathetic, but what we need is to hear some answers. You don’t need to answer that now, but that’s what we’re in the market for.”

FCA practitioner panel chairman and HSBC UK and Europe chief executive Antonio Simoes said his panel has primarily focused on the broader cost of regulation.

He said: “As a panel we have not discussed the FSCS as much, what we have discussed is the overall cost.” He said this year’s 7.9 per cent increase in FCA costs is “unsustainable”

The comments come after FCA chairman John Griffith-Jones told MPs the regulator would put the cost of the FSCS to advisers at the centre of an upcoming review.

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. What a pathetic reflection on all those regulatory bodies and committees who are charged with coming up with suitable suggestions. The Consumer Panel, the Small Business Panel etc. etc. all failed to even make suggestions to the Regulator when requested to give some sort input concerning the vexed question of the FSCS levy.

    It rather does underline what most of us already know – that these taking shops are populated by disengaged do-gooders who are happy to accept a pretty reasonable stipend for doing bugger all.

  2. It’s really not that difficult. Use the FCA fines to meet the cost before they are syphoned to the Treasury or wherever they go.

    That way poor behaviour pays for poor behaviour/outcomes (not all FSCS claims are as a result of poor behaviour on the part of advisers).

  3. A risk-graded product levy (payable to the FSCS, a bit like VAT) wouldn’t be an overnight solution (as Mark Neale seems to be suggesting intermediaries as asking for) but such levies would surely accumulate gradually and offset costs to the adviser community.

    Product levies might well also render high risk products considerably more difficult to justify for those wishing to sell them and make consumers much more wary of buying into them.

    So that’s one solution (answer). Next ~

    Kick the FCA firmly up the backside to make it ask (as part of its RMA Returns process) and actually look at the responses to simple questions relating to whether or not firms are transacting any high risk types of business, what DD procedures they undertake to justify the sale of such products and ~ CRUCIALLY ~ do they have in place appropriate PII cover? The fact that the FCA just demands ever more data that it doesn’t bother actually to examine is SO typical of the many things fundamentally wrong with it and polite words cannot express my utter contempt for JG-J’s description of the purpose of demanding all this data as “pragmatic”.

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