The Financial Services Compensation Scheme (FCSC) "continues to be challenged" by the complexity of some firm failures in the investment intermediation sector, its chief executive Mark Neale has remarked.
Citing the recent collapse of Catalyst, which promoted funds backed by ARM Asset Backed Securities SA, as an example of a complex case, Neale said the Scheme often finds it difficult to determine whether investors' losses are the result of bad advice or another factor.
"[We continue] to be challenged by the complexity of many failures in the investment intermediation sector," Neale wrote in his latest Perspectives newsletter.
"We turn round 90% of non-deposit claims within our service standards - three months for PPI [payment protection insurance] claims, six months for most others - but the small proportion of claims which take longer almost always reflect the need to unravel difficult legal issues.
"In order to compensate, FSCS must establish that a failed business had a liability to the investors advised by an intermediary. But it is often far from straightforward establishing whether an investor's losses were caused by bad advice or by some other factor - fraud, for example - which the IFA could not readily have foreseen.
"And even once a liability has been established; it can be difficult to quantify the loss where the underlying investment was in an illiquid fund."
Highlighting these difficulties was not an excuse, Neale added, but showed that protecting investors was often very different from protecting depositors.
Annuity market worth £4bn in 2017
For ‘distress’ caused
Oversees £30bn of advised and D2C assets
Less than a third of top paid employees are women
£1bn business since inception