IFAs last in queue for FSCS Keydata rebate

The FSCS will prioritise the fund management sector ahead of IFAs when it rebates the interim levy with any recoveries linked to Keydata.

The compensation scheme today announced its 2011/12 levy will be £217m, down £23m from the projections in its February Plan and Budget.

Investment intermediaries will pay £34m, less than its earlier estimate of £40m.

However investment IFAs who had hoped for a speedy return of some of the £93m interim levy they paid in January will be disappointed.

The FSCS says any financial recoveries it makes will first be used to rebate the fund management sector, which paid out £233m of the £326m bill for failures largely linked to the collapse of investment firm Keydata.

Fund managers were forced to cover the "overspill" from the investment intermediation class, which was the main target of the FSCS levy.

Investment intermediaries can only be levied up to £100m a year.

In a statement the FSCS says: "In relation to the interim levy announced in January, any recoveries it makes in respect of claims against investment intermediaries paid in the 2010/11 levy year will first be credited to the Investment Fund Managers in order to repay the cross-subsidy triggered by last year's interim levy of £326m."

The costs of pursuing recoveries will be funded by investment intermediaries.

However the costs of recoveries will be met from the proceeds before any funds are paid to the fund management sector, the FSCS says.

FSCS chief executive, Mark Neale, says: "We are pleased to announce a levy that is £23m less than originally projected. Firms and trade bodies have emphasised to us the impact our levies have on the businesses that must pay them.

"We are mindful that, in addition to this levy, investment firms will have received their bills in respect of the interim levy we announced in January.

"I want to assure all of our levy payers that we only raise funds that we expect to require and that we pursue recoveries against third parties whenever it is reasonably possible and cost effective for us to do so.

"These recoveries will be used to help offset the costs of compensating consumers when firms fail."