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Topics: FSA| Keydata| AIFA| Chris Cummings| FSCS
The cost of compensating Keydata victims is likely to hit £440 for the ‘typical’ adviser firm in the appropriate sub-class, according to AIFA calculations.
The association also reveals the FSCS sought legal advice before opting to allocate Keydata's £70m default costs to the investment intermediation sub-class, which includes many adviser firms and to which Keydata belonged.
Though AIFA's £440 estimate is significantly lower than earlier claims costs could rise to £10,000 per adviser, the organisation says its members are being ‘taxed' for the failure of poorly-run organisations.
AIFA says its analysis suggests the cost for full investment firms will be around £1,100.
However, the average AIFA member is only exposed to investment on around 40% of their business, meaning they will pay levies of approximately £440 to cover the cost of compensating Keydata investors.
Investment advisers have been told they will receive notice of their share of the £70m FSCS interim levy by the end of March. It will need to be paid in full within 30 days.
Meanwhile, AIFA reveals the FSCS only allocated the levy to the investment intermediation sub-class after seeking legal advice. It says it is now "imperative" this legal opinion is made public.
AIFA director general Chris Cummings says legal advice AIFA has received indicates the Keydata decision can only be challenged on the grounds of evidence of ‘a mindset of reckless indifference' within FSA.
The only precedent of a similar action, from BCCI against the Bank of England, was unsuccessful. "Exercises such as this can be extremely costly," Cummings says.
Law firm Regulatory Legal is pursuing a judicial review against the FSCS on the grounds it failed to adequately consult with IFAs and industry stakeholders.
"IFAs are being asked to pay too much for the failures of others," Cummings adds. "Importantly, this is a clear demonstration of why good firms should receive regulatory dividends - such as lower fees."
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Keydata - a product provider
I was always told that "if it walks like duck, quacks like a duck and looks like a duck - then it must be a duck". In the same context - why is Keydata not treated like any other product provider? and costs rightly levied where they belong - amongst product providers!
Posted by: Colin Stratton
Another injustice
It is staggering the injustices being brought to bear by this utter dogs dinner of regulation and financial incompetence by all those who proclaim to know better than the rest of us. How can Keydata be classed as an IFA when it was doing nothing but selling financial products in the same was as other financial product providers? How too can a "product provider" even be able to register as an IFA which I suspect meant it was cheaper for them to do so which again should have raised issues ? This is a "regulatory failure" and the regulator should pay up and stop blaming everyone else for their own mistakes and expect us to pay for them as well as their wages and costs. Financial regulation implimented by New Labour and their FSA is a complete injustice and should be treated as such. You only have to look at the mess they have caused to tell it does not work so why do we keeop throwing money down the drain to keep them in the style they have been accustomed to while everyone else suffers? Utter madness and time everyone woke up and smelt the stench or they will be paying for ever (and this is the polite version !!).
Posted by: Michael Fallas
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AIFA NEEDS TO DO MORE
Chris you should be doing more. If IFAs represent less than 1% of UPHELD complaints at FOS and banks in the region of 59% (FOS figures). We should only be paying less than 1% or regulatory fees, less than 1% of regulatory requirements, less than 1% paperwork etc etc Less than 1% is negligible e.g. no regulations at all for IFAs. This work out to advsier only paying about £225 per head for gneral regulations and nothing for things we're not involved in. Come on Chris start thinking smart and start being pro-active!!!!
Posted by: Incompetent Regulators Awards Team