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FCA consults on extending FSCS investment protection
by Michelle Abrego on Oct 03, 2013 at 11:56
The Financial Conduct Authority (FCA) is consulting over widening the scope of claimants who are eligible for compensation from the Financial Services Compensation Scheme (FSCS).
The move could lead to financial advisers footing the bill for claims made by unincorporated associations and large partnerships which lose money through investments going wrong.
The regulator has issued a consultation paper which proposes that all unincorporated associations and certain large partnerships will become eligible to claim on the FSCS if an investment firm fails.
It said: ‘This consultation affects firms authorised by the FCA and in particular firms authorised to carry on investment business that contribute to FSCS levies if an investment firm is unable, or likely to be unable, to meet claims against it.’
Currently EU rules allow member states to exclude some categories of claimants from eligibility, such as Government and local authorities, large companies and professional and institutional investors. The FCA said it did not now consider that large unincorporated associations fell into any of the permitted exclusions.
Under the new proposals partnerships will be able to claim on the FSCS if they do not exceed two of the three criteria: turnover of £6.5million, balance sheet total of £3.26 million and 50 employees.
The size cut-off for partnerships being eligible to claim will change from net assets not exceeding £1.4 million to the higher size limit that applies to companies.
The FCA estimates these changes would apply to 5,000 associations and 24,000 partnerships.
This would mean such organisations have the same protection as other consumers with similar investment claims.
The regulator said that these changes are part of its objective to secure an appropriate level of protection for consumers. The rule changes for future investment firm failures and the redress for past failures are to meet requirements under EU law.
The FCA said the size and nature of the organisations meant that they were unlikely to hold significant assets as investments.
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by Alex Steger on Dec 11, 2013 at 10:19