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View the article online at http://citywire.co.uk/wealth-manager/article/a639990

Industry demands clarity on 'unacceptable' FSCS bills

by Annabelle Williams on Dec 07, 2012 at 08:13

Industry demands clarity on 'unacceptable' FSCS bills

Senior figures in the industry are calling for urgent clarity on how much investment managers will have to pay to cover deficits in the financial services compensation scheme (FSCS) for 2010 and 2013.

Last week the FSCS said it will pay back £71 million to firms that had resubmitted tariff data for 2010/11, following its decision to exclude fund income from the catchment. 

But the return means there is now a £33 million deficit in funds used to cover the 2010/11 period, and managers will have to pay their share.

Apcims’ director of regulation Ian Cornwall described the bill as unacceptable and said he was hearing ‘huge disquiet’ from members over the levy, and empathising with Charles Stanley after the charge swallowed 40% of its pre-tax profit. 

‘There is huge disquiet about the payments [investment managers] have been forced to make for activities that bear no relation to their activities,’ he said. ‘Charles Stanley said it was an additional tax on their activities and that reflects that what they are being forced to pay on the compensation scheme on a continuous basis is unacceptable.’

The levy comes in addition to a £25 million shortfall projected for the 2012/13 period, which managers will also have to cover. The IMA called for details of the exact charges that firms will face to be released as soon as possible.

‘What we don’t know is how it’s going to be shared out, how that extra money is going to be split among firms. We want that to be released quickly and for people to know how much they are going to pay and when,’ a spokesperson said.

The trade body reiterated its proposal that income derived from funds should not be excluded from tariff data. ‘We need to get to a position where everyone should be [calculating tariff data] on the same basis,’ it added.

A senior executive from a national wealth manager echoed the calls for urgent clarity on how much his business would be expected to pay, especially as the firm had previously forked out several million in the interim levy.

‘It’s difficult to know how this will impact on us because obviously for the deficit that exists, we don’t know quite what our share is going to be,’ he said.

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2 comments so far. Why not have your say?

CoeurDeLion87

Dec 07, 2012 at 09:33

Although there's a degree of sympathy regarding the level of FSCS that stockbrokers are being asked to pay as well as the lack of credible relevance to the PCIAM's regarding some of the claims/disasters in my view there's also a degree of hypocrisy in all of this. Let's not forget that these very same pro-RDR pro-FSCS firms have benefited enormously from the consolidation that has taken place since the mid-90s largely due to fascist principles care of our super regulator. It's quite clear that many have cosied up to FSA CISI APCIMS & others with vested interests in this uneven playing field. With the pro-RDR firms converting themselves to a universal fee paying model that investors are effectively over-paying for the only real losers will be shareholders whose payouts may get effected, the clients and as no-one dares to mention the bonus pools. Taking away personal liability has allowed many to take their eyes off the ball. The real blame should be applied to those who are paid to protect these firms internally from regulatory changes as well as to protect the very clients of these firms. The industry seems to have forgotten the main reason why we're all here which is a major failure in itself. I don't recollect the old mostly dead Partners from the 50 or so failed firms from the early 1970's complaining when the old slush fund simply ran dry. All this current alarm smells of incompetence and greed to me.

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PCIAM

Dec 07, 2012 at 11:42

You're right. There's nothing quite like unlimited liability to concentrate the mind. But this is only part of the issue.

To me the nub is that with statute-based regulation, the industry has no powers of sanction over the transgressors. Liabilities, yes, but sanction, no. Statutory regulation has taken away the power of the industry to poilce itself.

On the other hand, the body with the powers of sanction has no liabilities. Regulators in general can be utterly incompetent and yet remain free from all liabilities. It is impossible to sue the FSCS or the FSA, I understand.

You are right to slam the cosy-up'ers, but do remember that they are merely reacting in a typically huuman way to the changes since 1987 by exploiting the opportunities that this horlicks has thrown up. The fact that this new 'industry' contributes nothing of value after consuming 10% of the turnover of the private client industry is monstrous.

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