The maximum award the financial Ombudsman (FOS) could order firms to pay in client redress may double to £200,000, a City law firm suggests.
An FSA questionnaire sent to a sample of financial firms asks principals to state how much redress they have paid in the last year via the FOS and court awards.
It asks on how many occasions awards were limited by the current £100,000 FOS maximum, and by how much.
The listed options are: £0-£50k, £50-100k £100-150k and £150-200k.
City law firm Reynolds Porter Chamberlain (RPC) says the communication, which will inform an upcoming FSA consultation on client redress, suggests the FSA is considering increasing the FOS's maximum award from £100k to £150k or £200k.
In the regulator's Business Plan 2010/11, it says it will publish a paper in Q3 this year consulting on whether there should be changes to award limits.
RPC partner Jonathan Davies says increasing the FOS maximum may place some financial services firms at risk of closure and make it more difficult to secure appropriate professional indemnity insurance (PII).
"In the past IFAs have found it difficult to get PII including cover for FOS awards, and a big increase in the Ombudsman's maximum award could make it very difficult for IFAs to get insurance."
FOS spokesperson Martyn James says any decision to raise the compensation limits is a matter for the FSA.
"The proportion of complaints which could go above the £100,000 is very small," he says.
"The FSA looks at the compensation limit every three years, but the limit hasn't changed for a considerable time."
Two global vehicles
'Further plug advice gap'
Must appoint separate CEOs and boards
Advisers do come out well
Will report to Mark Till