Keydata levy against 'spirit of law', but will be overturned

Adviser Alliance founder Alan Lakey says the £70m additional levy imposed on intermediaries for the failures of Keydata and two stockbrokers “goes against the spirit of the law” – but is confident the FSCS will re-think its decision.

Lakey says Adviser Alliance has been in contact with the FSCS and is hopeful its action, alongside the work of law firm Regulatory Legal, AIFA and the IFA Defence Union, will make a compelling case to overturn the proposal.

Last week, the FSCS sent a letter to Regulatory Legal - which has launched a campaign to fight the levy - saying it had not reached a decision on who will carry the can for the failings of Keydata and stockbrokers Pacific Continental Securities and Square Mile Securities.

It invited the firm to make representations on behalf of its adviser clients by 15 March.

"The FSCS seems to have mellowed its position and appears to be back-tracking somewhat," says Lakey. "Ourselves, AIFA and Regulatory Legal are all singing with the same voice and this will make a robust case for the FSCS to have a re-think. It is now very likely a deal will be reached."

He thinks the regulatory body's levy proposal smacks of hypocrisy.

"Under the FSA's TCF initiative, the regulator will fine me if I do something against the spirit of the law," he says. "In this case, classing Keydata in the adviser sector clearly goes against the spirit of the law, even if the decision is technically ok. So, we want the same standards applied to the regulator as it applies to advisers."

He adds the FSCS underestimated the backlash and strength of outrage the levy proposal would trigger.

"The argument against the levy is overwhelming," he says. "IFAs have been outraged by the decision and consumers, including my clients, have been appalled. All advisers who dealt with Keydata felt they were dealing with a product provider."

Adviser Alliance is now recruiting members as it looks to raise funds to mount legal challenges against what is sees as damaging regulation. But Lakey says the not-for-profit organisation will not pursue legal action on the Keydata levy as this would "dilute" the work already being undertaken by Regulatory Legal.

Last week, the law firm said it had generated enough funds to mount a judicial review against the levy, although partner Gareth Fatchett hopes a negotiated settlement can now be agreed.