Q&As about Investments
How do you decide whether you can help me?
To qualify for compensation you must be eligible under our rules which are made by the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA), the independent watchdog set up by government under the Financial Services & Markets Act 2000 (FSMA) to regulate financial services in the UK and protect the rights of consumers. The rules tell us which types of claim are eligible for compensation, and limit how much compensation we are allowed to pay.
For an investment claim to be eligible to receive compensation from us, it must meet all of the following criteria:
(a) the advice you received to buy the investment must have been given on or after 28 August 1988; and
(b) the firm that advised you must have been authorised by the appropriate regulator to do so at that time; and
(c) you must have lost money as a result of the advice you were given; and
(d) the firm (or its principals) no longer has sufficient assets to meet claims for compensation.
What happens once I have contacted you about my complaint?
We will check to see if your claim is within our remit, for example that the advice you received to buy the investment was given to you on or after 28 August 1988, and that the firm that gave you the advice is unable to pay your claim. Under our rules, we can only begin to investigate your complaint if these conditions are satisfied. We will also consider any supporting information that you have provided to us. If we are unable to help you, we will write to you to explain why.
If we can investigate your complaint we will write to you to ask you to complete our detailed application form, and to provide us with as much further information as you can about your circumstances at the time you were given the advice.
Why do I have to fill in an application form?
The application form tells us what type of claim you have; when, why and how much you invested; why you believe you have a claim; if relevant, what advice you were given at the time; and whether the product was suitable for you at the time you were advised to buy it. It also gives us the authority we need to collect information relevant to your claim.
Please provide as much information as you can, answer all the questions and provide any documentation that you have relating to your investment and the advice you received. If you are unsure about any of the questions on the application form, please contact us. We will be happy to answer any questions you may have.
Do I have to pay anything to have my claim considered by the FSCS?
No. The FSCS is a non-profit, independent organisation set up under FSMA. Our service is free to consumers.
What should I do if I decide that I no longer wish to make a claim?
When you receive an application form, if you decide that you no longer wish to continue your claim you should sign the front of the form and tick the box stating that you no longer wish to claim. Send the application form back to us and we will update our records to ensure that you don't receive any letters chasing your outstanding form.
What happens when I return my completed application form?
Generally, there are three stages that we have to work through when considering claims for compensation:
Check that the firm that advised you is not in a position to pay claims.
As we are a fund of last resort, we can only consider claims if they cannot be paid by anyone else. In order to be able to investigate your claim, we have to be sure that the firm that advised you is not in a position to pay claims against it. We describe this as being in default. We are only able to consider claims for compensation against firms that are in default. If the firm is no longer trading but still has assets that could meet your claim, we will probably be unable to help you. If this is the case, we will write and explain this to you.
Assess your claim for compensation.
If the firm is declared in default by us, we then need to assess your claim for compensation. For investment claims we must establish that your investment was mis-sold to you and that you have lost money as a result of the advice you were given. To do this, we will review all the information that you have provided to us and establish whether the advice you received was unsuitable for your circumstances at the time it was given.
For example, we will consider whether the investment was suitable for someone with your investment aims or attitude to investment risk at the time you made the investment. Sometimes we are able to collect information from other sources (such as files kept by the firm that advised you or information from product providers) to help us.
There is no guarantee that we will uphold your claim for compensation and there are limits to the protection the FSCS can provide. However, the FSCS is an independent body. We will consider your claim fairly, weighing up all the available evidence. If we reject your claim, we will write to you to explain why. If we uphold your claim, we will calculate how much, if any, compensation you are due.
Establish whether you have made a loss.
In order to calculate how much compensation you may be due, we need to calculate whether you have lost money as a result of the advice you were given. The FSCS can pay compensation only for financial loss. If you have not made a loss, you will not be due any compensation.
We will calculate your compensation by comparing the situation you are in now against the situation you would have been in had you not been sold the investment. This calculation will show us whether you are worse off or better off as a result of the unsuitable advice. If you are better off, and hence have not made a loss, we will not be able to pay you any compensation. We will write to you to let you know if this is the case.
What do you mean by financial loss?
To be eligible for compensation you must have lost money because of your dealings with the firm. For investment claims the compensation we pay would try to take account of the financial position you would have been in had you not invested.
The FSCS has added a 'Rate of Return' to the loss for which it is paying compensation. Why is this added?
If you lost your money because of, for example, unsuitable advice given by a firm, or theft, you will also probably have lost the opportunity to receive some return on that money. To reflect this, as part of the compensation we pay, FSCS may add an additional amount to compensate for that loss of return. We calculate this by reference to what you may have received if your money had been in a riskless alternative, such as a bank or building society account.
What cover do I have if I have a SIPP?
Self-Invested Personal Pensions (SIPPs) are usually viewed as a type of ‘wrapper’. Once a SIPP is set up, it can hold a variety of financial products within this wrapper arrangement. This can include regulated investments, deposits and insurance products. These underlying products may be held directly with the SIPP manager or with a separate financial services provider. These could include organisations such as:
- fund managers
- bank or building societies
- an insurance company
Should you need to make a claim to FSCS due to the failure of one (or more) of the product providers or products held within the wrapper, FSCS may be able to assist.If the provider of the underlying products held within the SIPP were to fail the compensation limits would depend on the type of product held within the SIPP. Please see our compensation limits page for more details.Where a consumer can prove that they have suffered a financial loss due to misleading or inappropriate advice from a UK authorised financial advisor to take out the investment product, we will consider the complaint under our investments protection limit of up to £50,000.
How long will it take to process my claim?
After a firm has been declared in default, FSCS generally aims to process your claim within six months of receiving your application form. However, we have recently experienced a large increase in the number of claims coming to the Scheme generally, which means that some claims are currently taking longer than six months. Delays may also be caused by factors outside our control, or because the claim is particularly complicated. For example, we may have difficulty getting hold of important files from third parties; we may be waiting for information from a liquidator; or we may have many claims arising from a particular default which will take time to process.
If you are facing immediate financial hardship, we will try to deal with your claim as a priority. If this is the case please contact us.
How long will my claim take to process if you have not declared the firm in default?
If your claim is against a firm that has not so far been declared in default by us, your claim may take longer than six months to complete. We need to investigate whether or not the firm has the resources to meet claims itself and these investigations can take some time because we rely on third parties for information. We are increasing our resources in the Default Team, to try to speed up the process where we can, and we will do everything in our power to ensure that we can reach a decision on your claim as quickly as possible.
If you are facing immediate financial hardship we will try to deal with your claim as a priority. If this is the case please contact us.
The firm I dealt with is no longer trading, but the FSCS says it cannot help me. Why?
As a fund of last resort, we can only consider claims if they cannot be paid by anyone else. If the firm is no longer trading but still has assets that could meet your claim, we are unlikely to be able to help you. This means that you will need to take your case up with the firm you dealt with.
If you are having problems finding the firm or its owners and wish to pursue your claim, we may be able to provide contact details. Please contact us.
If the firm (or its owners) will not consider your claim, you could take legal advice or contact your local Citizens Advice Bureau for help.
The Financial Ombudsman Service (FOS) may be able to help you make your claim in some circumstances.
Are offshore investments covered?
Yes, if you received advice from an investment firm that is authorised by the Financial Conduct Authority (FCA) or the Prudential Regulation Authority (PRA). Firms based outside the European Economic Area (EEA) are unlikely to be covered by the FSCS.
Are investments held by nominee companies covered?
Authorised investment firms such as stockbrokers may arrange for your shares to be registered in the name of a nominee. They can do this only if you agree in writing.
Nominee companies are covered if an authorised investment firm has accepted responsibility for their losses. If not, we will pay compensation only if the nominee firm is authorised by the Financial Conduct Authority. You can check this by using the FCA's Firm Check service or by phoning the FCA's Consumer Helpline on 0800 111 6768.
Do you cover investments made through solicitors and other professionals?
The Law Society has its own compensation scheme for its members' investment business, so claims against solicitors in England and Wales should be referred to it. Claims against solicitors in Scotland should be referred to The Law Society of Scotland.
Claims against some other professionals can be made to us, but only if the claim arises on or after 1 December 2001. If your claim is for activities before this date, please look at our Claiming compensation booklet for details of the organisations to contact.