The Financial Services Compensation Scheme (FSCS) has paid out £5,696,776 in claims related to failed contracts for difference (CfD) trader Direct Sharedeal - with liabilities falling on investment advisers.
The Glasgow-based stockbroker entered administration in 2011 after alleged mismanagement of high risk CfD investments, with many investors claiming their accounts were overtraded leading to substantial losses.
CfDs are highly-leveraged investments which open investors up to increased speculative gains but also large potential losses.
The FSCS scheme - which is paid for by levy payers - began compensating Direct Sharedeal investors in February. So far it has received 453 claims against the firm.
A FSCS spokesperson confirmed that the costs related to Direct Sharedeal claims will fall on its investment intermediation sub-class SD02, which houses investment advisers.
FSCS costs are allocated to and divided among a sub-class or group within financial services, based on the activity that has caused the claims.
The current bill of £5.7m could more than double, however - a report by Direct Sharedeal's joint administrators, Finn Associates, last year suggested claims could potentially reach up to £13m.
An ambitious objective
'Something completely new'
'Illusion of control'
Reasons to be cheerful
Total investment reaches £9m