For Immediate Release: Monday 28 February 2005
TIME IS NOT RIGHT FOR PROPOSED £27 MILLION LEVY
IMA responds to Financial Services Compensation Scheme (FSCS) proposals
The IMA is challenging the basis for the proposed £27 million levy which will fall to the asset management industry to meet claims arising from split capital investment trusts. While the FSCS has the power to impose levies it also has a responsibility to use that power only if it has reasonable grounds for believing it needs to raise additional funds. Having examined the rationale for the levy, IMA remains concerned that the present estimate involves a series of assumptions which could turn out very different.
IMA members recognise and stand by their obligations to the FSCS but in the absence of evidence of immediate need for funds IMA would suggest a more flexible approach. The FSCS has the power to impose levies during the course of the year and a corresponding responsibility to use this flexibility to avoid collecting levies before they are required. The current proposals would breach this responsibility and IMA is in discussions with both the FSCS and FSA over the proposals.
Richard Saunders, Chief Executive of the IMA commented,
"We do not think it is necessary for the FSCS to be raising this levy at this stage. It is too soon to say that there will be a surge of compensation awards in the coming year. It would make more sense for the FSCS to use the powers it has proportionately and to await real evidence of eligible claims before deciding whether it needs to raise additional funds from our members. We are therefore urging the FSCS to re-consider how it will impose the levy for this year."
Full copy of response attached.
For further information, please contact:
Helen Stephenson, Communications Officer, IMA, 020 7831 0898
Out of hours contact:
Despina Constantinides, Partner, Polhill Communications, 07801 337 677