FSCS levy could top £100m

Advisers may face a further interim Financial Services Compensation Scheme (FSCS) levy of at least £40m.

Mark Neale
Mark Neale

The FSCS also warns compensation costs for Arch cru and MF Global could go above the £100m adviser sub-class limit and trigger a cross-subsidy for fund managers.

In its Outlook newsletter published today, Mark Neale, chief executive of the FSCS, says the scheme may incur higher compensation costs than it estimated in the investment intermediation sub-class in relation to Keydata, Wills and Co and other stockbroking firms.

In the newsletter Neale says: “It is possible these higher costs may cause us to raise an interim levy on the investment intermediation sector this year, although we are not yet able to take a final decision on this.

“Our current projection is that we may face a deficit of at least £40m on investment intermediaries before the next levy becomes available.”

The newsletter also warns there is a potential risk of cross-subsidy if compensation costs for Arch cru and MF Global push investment intermediation costs above the £100m threshold.

The estimated £40m interim levy figure has excluded provisions relating to Arch cru and MF Global, as the FSCS says it currently has no basis for determining these amounts.

The FSCS says firms should “treat this estimate with caution” due to the unpredictability of claims volumes.