20th January 2011
Firms in the Investment Intermediation and the Investment Fund Management sub-classes (SD02 and SD01) are likely to be required to pay an interim levy of £326m before the end of the financial year. This will be made up of £7m management expenses and £319m compensation costs.
The FSCS is raising the levy to cover the costs of claims against Keydata Investment Services Limited, Wills & Co and other investment intermediary firms.
Following detailed discussions with key industry bodies, the FSCS announced the interim levy so that firms can provide for the potential costs.
Of the £20m levy already raised on the Investment Intermediation sub-class earlier this year, £14m related to compensation costs. This means a further £86m can be raised before the £100m annual threshold for this sub-class is reached. The planned interim levy will trip the annual threshold for the Investment Intermediation sub-class which means the Investment Fund Management sub-class is expected to contribute.
Firms in the SD01 Investment Fund Management sub-class will pay £233m
Firms in the SD02 Investment Intermediation sub-class will pay £93m. (£7m of this is management expenses).
The costs have been allocated on the same basis as last year’s interim levy.
The FSCS must act according to the rules set for it by the FSA, who consult with the Scheme and the industry, in setting the rules. The FSCS does not have the power to vary from the rules when allocating levies between firms. The Scheme has a duty to pursue recoveries and does so vigorously wherever reasonably possible and cost-effective.
Any recoveries are attributed to the class or sub-class that they relate to and are used to reduce future compensation costs. In the event of cross subsidy, recoveries are first returned to the cross subsiding sub-class.