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Hargreaves calls for FSCS review after £3m bill

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Hargreaves calls for FSCS review after £3m bill

Hargreaves Lansdown has hit out at being forced to pay 'for the incompetence of others' after receiving a £3 million bill as part of the Financial Services Compensation Scheme's (FSCS) interim levy.

Hargreaves said in its interim results the funding and operation of the FSCS needed to be reviewed.

'In respect of the FSCS levy, it is disappointing that shareholders in a reputable firm such as Hargreaves Lansdown must foot the bill for the incompetence of others,' said chief executive Ian Gorham (pictured).

'We have made our feelings on the matter known and believe the way the FSCS is funded and operates needs to be reviewed.'

Hargreaves has reported an increase in profits before tax to £56.3 million in the six months to the end of December 2010, up 41% from £39.8 million in the same period last year.

Assets under administration have risen to £22.3 billion, a 41% rise from £15.6 billion last year.

Assets increased by £4.8 billion in the six months to the end of December. 'Stock markets have risen and net business inflows have virtually matched last year's record amounts, resulting in a significant increase in our assets under administration,' said Gorham.

He added the rise in profits was due to 'strong cost controls', pointing to only a small rise in employee numbers from 607 to 626 over the last year. 'Profit would have been significantly higher had we not been billed for an additional £3 million in the FSCS levy,' he added.

Gorham added he welcomed the Financial Services Authority's (FSA) stance on fund manager rebates to platforms and the exemption of execution-only services from the retail distribution review.

'The proposals rightly retain an exemption for execution-only business and recognise the value of services provided by a platform to a product provider, such that platforms may continue to receive payment from providers,' he said.

'We see both outcomes as positive and wish to see them confirmed in the policy statement to be published in 2011,' he said.

'Despite these outcomes, we believe it is important that FSA senior management remain focused on overseeing sensible and restrained regulatory output from both the UK and Europe during the current upheaval in the UK regulatory structure,' he added.

The European Commission has proposed severe restrictions for execution-only services in its consultation over Mifid II rules.

Hargreaves has announced a 4.5p dividend.

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