Financial Conduct Authority chief executive designate Martin Wheatley has admitted plans to reform the Financial Services Compensation Scheme have met with fierce industry opposition, and says the scheme’s fairness needs to be “looked at very carefully.”
The FSA published a consultation on reviewing the FSCS funding model in July which will separate funding relating to activities under the Prudential Regulation Authority from activities under the FCA with no cross-subsidy between the two.
The regulator also proposed to set up a ‘retail pool’ made up of FCA firms such as advisers and fund managers which have to pay claims if one class of FCA firms breaches their annual claims limit.
The IMA has branded the proposals as “shocking” and argued fund managers will be liable to pay compensation claims from the misselling of insurance and structured products, but the providers would escape liability. The FSA has previously denied this would be the case.
At the Journey to the FCA launch event this morning in London, Investment Management Association director of wholesale Guy Sears again highlighted the issue, saying: “Given under the FCA providers should have responsibility, are you content that insurers and banks will have no responsibility to contribute to the scheme on the conduct side?”
Wheatley said: “We are in the process of consulting on the compensation scheme. We have not reached a final conclusion. I think you are responding to what went out in the consultation paper as a model and we have had a lot of feedback to say there are problems with that model.
“I am aware of the issue, and a number of people have made it very clear to us we need to look very carefully at the whether the way the compensation scheme is set out delivers a fair outcome. It is a good challenge, but we are still in the process of determining that.”