Wednesday 24 October 2012
IMA: FSCS FUNDING PROPOSAL LACKS VISION, LOGIC AND FAIRNESS.
The FSA’s proposed financial services compensation scheme (FSCS) funding model is fundamentally flawed, says the Investment Management Association (IMA) in its response to the regulator’s consultation today.
Guy Sears, IMA Director of Wholesale, says:
“FSA’s proposal is wholly unacceptable.
“Their current model absolves banks and insurance providers of any obligation to contribute to the FSCS. Are general insurers, life and pensions providers really to be off the hook for the mis-selling of their own sector’s products? This is absurd.
“To go further and expect fund managers to pay for that mis-selling is entirely unreasonable. The FSA is sending the wrong message to every segment of the industry: those which have the highest complaints rates no longer have to contribute; and fund managers now have to bear the burden of every large intermediary failure.
“The new FCA needs to be a strong conduct risk regulator and that will mean looking hard at all product providers. The design of the compensation scheme should reflect this. If not, that will be a worryingly backward step for investor protection.
“The IMA proposes the use of a reserve policy and three year forecasts. If adopted, our model would provide greater certainty to firms about future levies, smooth exceptional claims and ensure the right person pays.”
Notes for Editors
IMA and Hogan Lovells also published a report today reviewing the funding provisions and the issues which FSA should have been considering.
The recently published ‘Journey to the FCA’ outlined that the FCA will more readily let firms fail. This will likely result in increased compensation claims and so the need for a fair funding system will become increasingly imperative.
Under the FSA’s proposals fund managers will bear 40.8% of excess claims for general insurance products, and 29.0% for life and pensions products. Insurance companies, the manufacturers of those products, pay nothing.
For further information please contact:
Mona Patel, Head of Communications
020 7831 0898 or 07834 089332
About the Investment Management Association
- The IMA is the trade body for the UK's £4.2 trillion asset management industry (retail and institutional) which is one of the world's leading investment management centres.
- Our role is to represent the interests of the asset management industry to government and regulators both in the UK and internationally.
- The money our members manage is in a wide variety of investment vehicles including authorised investment funds, pension funds and stocks and shares ISAs.