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View the article online at http://citywire.co.uk/wealth-manager/article/a599584

IMA and Apcims call for sweeping FSCS review

by Sarah Miloudi on Jun 26, 2012 at 15:59

IMA and Apcims call for sweeping FSCS review

The Investment Management Association (IMA) and the Association of Private Client Investment Managers and Stockbrokers (Apcims) have strongly opposed the regulator's proposed changes to the Financial Services Compensation Scheme (FSCS).

The trade bodies argue a much broader review is needed to tackle the wide range of issues.  

They have joined forces to argue that the proposals unveiled earlier this year do not cover the impact of cross-subsidy, particularly when asset managers had to find £233 million to contribute to the £333 million needed in 2011 for intermediary defaults.

'Any wider review must consider the appropriateness of recovering extremely high levels of compensation claims. The IMA and Apcims would expect the FSA to consider whether improvements can be made to the supervisory processes to mitigate the risk of future claims,' the bodies said.

While few debate the need for the FSCS, many discretionaries and asset managers feel that at times the payment can be too high, and penalises the parts of the industry that adhere to the rules, rather than the pockets which do not.

Moreover, after the suprise rise in FSCS some 12 months ago to compensate for the Keydata failings, a number of firms feel they have tobudget for payouts they are unable to accurately assess.

Guy Sears (pictured), IMA director of wholesale, said that more needs to be done to assess the needs of the industry when it comes to the FSCS.

'We’re disappointed to see that the bulk of the proposal concentrates on improving administrative processes within the FSCS at a time when the scheme rules need a complete overhaul,' he said.

Ian Cornwall, Apcims director of regulation, added: 'The proposals appear to address a limited number of ad hoc issues associated with the FSCS and it is unclear why it has been published now given a further consultation paper on the FSCS is due to be published shortly. Certain issues, such as the definitions of eligible claimants, addressed in the current consultation paper may also need to be revisited in the further consultation.'

4 comments so far. Why not have your say?

David Cowell

Jun 26, 2012 at 16:22

Simple solution: scrap the FSA and its successors and fully fund the FSCS. Why have both?

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Anonymous 1 needed this 'off the record'

Jun 26, 2012 at 16:49

I have yet to be convinced that there is any serious appetite to address the critical failings apparent in the current funding model. Its good to see the IMA involved because the FSA and FSCS have shown no interest in listening to IFAs. From the viewpoint of the FSA/ FSCS why would they want to change the status quo so long as investors are compensated - do they care where the money comes from??

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Geoff Hartnell via mobile

Jun 26, 2012 at 17:58

The IMA have diametrically opposite views to the IFA community.

Without their pressurising the Treasury to force the FSCS to pursue "recalcitrant" IFAs who distributed Keydata products and then insist on representation on the "independent " FSCS Board there would never have the ensuing witch hunt which has left hundreds of IFA's firms exposed for a regulatory and professional failing of unprecedented magnitude.

The FSA/FSCS rules have now effectively been rewritten by the IMA.

IFA's have squabbled amongst each other apportioning the blame game whilst the Fund Managers have effectively and professionally got their act together.

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Jim Broad

Jun 27, 2012 at 13:13

@Geoff,

the COMP rules oblige FSCS to seek recovery of compensation paid out from liable 3rd parties, where good grounds exist to do so,

not because IMA tells them to do it.

You mention lack of professionalism within some IFA's and surely its that which has got some of them into the fix they now find themselves?

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