The Financial Services Compensation Scheme's announcement of a £60m interim levy for investment intermediaries once again brought the whole system under the microscope.
Here, the FSCS goes through some of the key questions advisers might have about the levies and its impact on the industry.
What is the interim levy?
The FSCS operates on a 'pay-as-you-go' basis, and raises levies to cover the projected annual costs of the Scheme (both operational costs and the costs of compensation payments).
Who, why and how? The FSCS answers your Qs on £60m levy
It normally undertakes a levy process once every financial year, although further compulsory levies against the relevant sub-class (up to the threshold limit) can be raised if costs are forecast to exceed those initially anticipated.
This interim levy arises from revisions to our earlier estimates of the compensation we are expecting to pay out before the next annual levy cycle and the management expenses for the 2011/12 financial year.
How much is the interim levy?
The interim levy is £60m. These costs fall to the investment intermediation sub-class.
Which firms are liable for the levy?
Firms who were authorised in the FSCS Investment Intermediary sub-class in the 2011/12 levy year. This includes firms that were authorised on 30 March 2011 or firms that have an annual eligible income apportioned to the sub-class.
What is this interim levy being raised for?
The interim levy includes an amount for some Keydata claims, which were higher in volume and value than expected. It also includes costs for MF Global, Arch Cru, Wills & Co and claims against smaller stock broking firms.
Does the £60m cover all the expected compensation costs against Keydata or does the FSCS expect to need further funds for Keydata claims in 2012/13?
The amount being levied in March is expected to be the amount needed up until the next annual levy cycle. FSCS will be announcing the 2012/13 levy shortly. FSCS assumptions are informed by existing claims trends, we have to bear in mind that these may not provide an accurate guide to the future.
Unforeseen events in the markets can impact upon our assumptions and our funding, subsequent levy requirements can change substantially as a result.
We do not levy unless there is a reasonable expectation that we would have to meet the costs of claims and management expenses in a particular area.
Lack of innovation for solutions
Some 2,000 consumers affected
Achievements, charity work and other happy snippets
Appetite has suffered since Brexit vote
'Failure to pay attention can result in enforcement'