Advisers are likely to have to cover minimum compensation costs of almost £11.5m as a result of claims against failed stockbroker Wills & Co.
The FSCS has decided to place the company, which was declared in default in July, in the investment intermediation sub-class, meaning any costs relating to successful client compensation claims will be levied on advisers.
Early indications suggest minimum compensation could be as much as £11.4m. The FSCS has so far received 1,400 claims in total, but has only dealt with 80. Each claim is capped at a maximum of £50,000, but payouts so far have reached £650,000.
However, the compensation scheme stresses it deals with claims on a case by case basis and says it is too early to say how much total compensation will be.
The FSCS classifies firms depending on the activities they carry out but pays claims "according to what gives rise to the claim". It says the two should, but are not always, the same thing.
Advisers were last year forced to shoulder £58m worth of compensation costs relating to claims against Pacific Continental Securities, Square Mile Capital and Keydata.
All three were placed in the FSCS's investment intermediation sub-class despite strong claims they should have put in the provider category.
In February, Wills & Co, which reportedly had 19,000 customers, was banned by the FSA from giving investment advice and the firm began winding down its business and transferring customers to other FSA regulated firms.
The following month, the regulator lodged a petition for the winding up of Wills & Co in the High Court, but this was later withdrawn.
Today, the financial ombudsman said it has received almost 400 complaints about Wills & Co in the first half of the year, and had found in favour of the client in 99% of cases.
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