A law firm challenging the FSCS's additional levy for the failures of Keydata and two stockbrokers says the body made a "schoolboy error" in not consulting advisers and warns a successful review will cause "havoc".
Regulatory Legal is pursuing a judicial review against the FSCS's decision to levy the investment intermediation sub-class to meet the £70m costs of the defaults.
Claims from Keydata will cost investment advisers £43m while failed stockbrokers Pacific Continental and Square Mile will cost £27m.
The challenge is on three grounds: a lack of consultation, incorrect allocation of sub-class and the 30-day deadline advisers have been given, from the end of March, to find their share of the levy.
Regulatory Legal has launched a campaign group to challenge the FSCS's decision and is looking for IFAs to join up and provide funding.
Membership costs £200 plus VAT for firms with less than five registered individuals (RIs) and £300 plus VAT for those with five RIs or more.
Gareth Fatchett, partner at Regulatory Legal, says he has received nearly 500 responses from IFAs expressing interest.
"This is a straightforward legal challenge based predominantly on the fact there was no consultation," he says. "The FSCS did not consult IFAs on its decision. It is a schoolboy error. Why should this section of the industry cop if for the whole lot?"
The Association of IFAs (AIFA) today reveals the FSCS sought legal advice before allocating the levy to the investment intermediation sub-class, which contains many IFAs.
It also estimates the "typical" adviser firm in the investment intermediation sub-class will pay £440 each toward the levy amount. Firms operating 100% investment advice will pay more than £1,000.
Regulatory Legal sent a letter to the FSCS on 18 February asking for a breakdown of its decision-making process, but has yet to hear back.
"If we get a judicial review, it will create mayhem," Fatchett says. "If we were to win a trial and the levy would not be payable, this will cause havoc."
The FSCS would not comment.
Achievements, charity work and other happy snippets
'A win for advisers'
Unconstrained multi-asset fund managed by Talib Sheikh
Who made the cut?
Transferring out of DB scheme