The FCA plans to extend coverage of fund management through the Financial Services Compensation Scheme (FSCS) to the 43.7 per cent of firms that currently pay reduced or no levies to the consumer protection scheme.
Currently the scheme only applies to some collective investment schemes, but an FCA consultation released today plans to extend it to unit trusts, investment companies with variable capital (ICVCs), and limited liability partnerships.
It does not plan to extend the scheme to alternative investment funds which are not collective investment schemes.
According to the FCA, 43.7 per cent of fund management firms and depositaries pay either no or reduced levies because they declare no eligible income.
The FCA says it does not have an estimate of the additional levy contribution each business would have to make. It also adds that it has no way of predicting future firm failures or whether claims from such failures would be covered under current rules, therefore it could not quantify the benefit for consumers.
The FSCS steps in when an authorised financial services firm is unable, or likely to be unable, to pay claims against it.
Financial services firms pay levies to fund both the FSCS’s operating costs and the compensation it pays out.
FCA executive director of strategy and competition Christopher Woolard says the FSCS ensures consumer confidence in financial services.
“We want to ensure protection for consumers and fairness for firms that pay for the compensation.”