'ombudsman still relevant' argues kerbel, director general of ofta
Ofta, the UK-based trade body for offshore financial advisers, has come under attack by ex-members for being an unnecessary expense for advisers based in regulated markets.
Peter Smith, CEO of Belgravia, which recently left the organisation, has defended his decision to leave, arguing that it will not damage the reputation of his company and claiming that the recently-changed costing structure of Ofta's ombudsman service made it undesirable to remain a member.
This comes at a time when offshore sales through intermediaries are rising sharply. The latest figures from Ailo put offshore bond sales at £8.2bn in 2004 - more than 20% higher than the previous year (see graph).
Smith said: "We pulled out of Ofta as a business. We are about to get a listing on a global stock exchange and will be regulated under the rules of that exchange and so Ofta no longer suits our purposes.
"Also, Ofta has introduced a flat fee in which brokers have to pay per client, per investment product to use the ombudsman service.
"In other jurisdictions, such as the Isle of Man, this type of service is free, so investors already have protection."
Ofta has recently changed its membership structure and charges. Previously, there were supporting firms of Ofta and each underlying intermediary had to pay £375 to be members of the organisation.
There used to be 11 supporting firms under these rules, but this has now fallen to five companies.
Under the new rules, instead of a £375 annual membership each broker must pay £50 to register each client's investment for the service. That amount is taken from their commission. Out of this £25 goes into the membership fee and £25 goes into the ombudsman compensation fund.
Presently the areas in which the members are situated include Cyprus, Japan, Eastern Europe and the Far East. But, there are individual members based in the Isle of Man, UK and Channel Islands.
Stephen Kerbel, director general at Ofta, said: "Unless a company that sells Isle of Man-domiciled products is also registered in a jurisdiction like the Isle of Man, investors may not have an adequate level of protection. Other jurisdictions do not have schemes to that level.
"If intermediaries are not registered with Ofta, investors are only able to pursue a resolution through law which is difficult in most cases if there is no formal dispute service in the country. If the market is unregulated, we can provide the investor with a route for some compensation."
Despite improved risk appetite
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