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Aifa contests size of compensation levy

Published on 26 Feb 2010 under category: legal

The industry body for individual financial advisers said this week that a £70 million compensation levy was costly and risked penalising firms unfairly.

Aifa calculated that compensating Keydata losses through the new Financial Services Compensation Scheme (FSCS) rules will cost each adviser around £440.

Chris Cummings, the firm's director-general, said: "This has been a failure of FSA (Financial Services Authority) supervision and as such adds further weight to our calls for FSA to review how it supervises firms, the risk models it uses and the allocation of costs. IFAs are being asked to pay too much for the failure of others."

Overall, most investment firms will be paying around £1,100 for the fines.

However, advisers can use the Premium Credit instalment arrangement to pay the FSA fees – though they will face additional charges from the interest rate of 7.5 per cent and nine per cent, depending on their trade body membership.

Also, it was found that the FSCS only allocated the levy to the investment intermediation sub-class after seeking legal advice.
It called for the legal opinion to be made public.

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