A total of 678 signatures have been collected for a petition to the FSA and the Treasury calling for a review of the funding of the FSCS.
The FSCS Levy Action Group was set up last month by Informed Choice managing director Martin Bamford amid outrage over the interim levy of £93m to cover claims against Keydata Investment Services, Wills & Co and other investment intermediary firms.
Informed Choice itself was hit by an interim levy of £10,012, up 650% on April 2010, while the group says some firms saw their levies rise by as much as 756%.
Bamford says: "I was really pleased to see we had so many people signed it. I'm just one person, so it's good to have so much support.
"As an industry, we have been able to unite on this issue more than any other and we look forward to hearing back from the FSA and the Treasury."
The letter in full:
FSCS Levy Petition
I enclose a petition with over 670 signatures, urging the FSA and Treasury to urgently review the funding of the Financial Services Compensation Scheme (FSCS).
What the retail financial services sector perceives as the unfair funding model of the FSCS is posing a major threat to financial advisers' businesses.
The interim levy charged to Independent Financial Advisers in the past month was to pay towards the cost of compensating investors in an entity (Keydata Investment Services) which was deemed to be an investment intermediary but bore little if any resemblance to IFA firms.
The invoices for this interim levy arrived at our offices with little warning and must be paid with 30 days. In the case of my own firm, our FSCS interim levy invoice was for £10,012 compared to £1,335 for the interim levy in April 2010. This is an increase of 650% and represents 2.36% of the turnover for my family owned and managed business in our company year ending 2009.
One of the most unfair aspects of the current funding model is that bad companies almost never pay - the levy is applied after the fact, by which time the offending company is often out of business and in no position to meet the cost of compensating their clients.
We hereby petition the FSA and the Treasury to urgently review the funding of the FSCS, in particular:
- Finding a way to make those adviser firms who sell failed investment products, such as those from Keydata Investment Services, more directly liable for the cost of compensation. It is unfair to place the burden for paying compensation on those IFA firms who have never recommended risky or esoteric investment schemes to their clients;
- Ensuring the proper classification of firms, so that firms like Keydata, who never gave advice to clients, are not categorised as intermediaries (or at least catergorised differently from advisers);
- A commitment from the FSA that they will use product sales data to intervene earlier where high risk products are being sold to retail investors, and take immediate action where they identify not only a risk of consumer detriment but a growing risk to the financial services industry for future compensation costs;
- Where adviser firms (or their PI insurers) are found liable to compensate investors in failed schemes, we would like assurances that any refund will be promptly distributed to those firms that have previously paid a levy to fund the same compensation payment, rather than the money going into the FSA.
We hope that you will give these requests your urgent attention and look forward to hearing what steps you intend to take to review the current unfair funding system for the FSCS.
Martin Bamford CFP APFS
Chartered Financial Planner
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