FSCS confirms £60m interim levy for investment intermediaries
The Financial Services Compensation Scheme today confirms a £60m interim levy for investment intermediaries. Firms in this sector will be sent invoices for their share of the levy by the end of March. They will have 30 days to pay the invoice or can use existing credit facilities to spread the costs of the levy.
However, investment fund managers are not facing an interim levy in 2011/12. The costs of claims driving the interim levy will not trip the £100m annual limit on the compensation costs for investment intermediaries. The total compensation costs of the annual levy and the interim levy are £82m so they do not trigger the cross-subsidy.
Driving the interim levy are the costs of claims relating to MF Global, Keydata Investments Services Ltd, CF Arch Cru and Wills and Co among others. These are higher than previously assumed, resulting in a funding deficit in 2011/12. MF Global claims alone are expected to account for almost £27m this year.
In addition, FSCS has made more decisions on Keydata claims than previously predicted with a higher average compensation payment than earlier claims.
FSCS has a duty to pay compensation claims as they fall due. Funding is necessary to cover the costs of compensation claims until the next levy is raised and becomes available in July.
Mark Neale, FSCS Chief Executive, said: "Our role is to provide compensation for valid claims as they fall due. This helps to build consumer confidence. Unfortunately, the value and volume of claims coming to us is highly unpredictable and the costs, as a result, are higher than previously assumed. So, as we advised the industry earlier this year, we have to issue an interim levy to continue meeting our responsibilities. We know this will be unwelcome news and sympathise with firms about the unpredictability of compensation costs. We do everything we can to provide as much certainty as possible."
FSCS will announce the 2012/13 annual levy in April.