Watchdog proposes new levy, as overhaul of FSCS is postponed
The FSA has delivered a double blow to brokers after unveiling proposals for a new fee and announcing a delay to its long-anticipated overhaul of the Financial Services Compensation Scheme (FSCS).
The watchdog has published a document proposing a new fee to pay for its beefed-up regulation of how client money is handled, including a new dedicated unit to oversee compliance.
The level of the fee, which is not due to be introduced until 2012/13, would be based on how much money firms hold in their client money accounts under the FSA’s blueprint.
Biba head of compliance and training Steve White expressed concern that the bulk of firms that also hold risk transfer money in their client money accounts would be hit hard by the change.
White said: “This is going to affect a large number of brokers. It would be inappropriate to start charging brokers an additional fee simply because they are holding risk transfer.”
In the document, the FSA says the fee is “a response to the unacceptably high level of risk posed to clients by poor compliance with our client money and assets rules”.
In a second blow to the industry, the financial services watchdog said in a statement on Tuesday that regulatory changes at both national and European level had led to a postponement of its planned consultation on reforming the FSCS, which was originally due to begin this month.
The FSA said: “With this in mind, we believe it would not be appropriate to consult on funding arrangements at this time, as we originally planned.”
The review is designed to examine whether the FSCS’s existing compensation levels are fair.
Insurance Times’s Fair Fees campaign has been lobbying for the FSA to give brokers a fairer deal when it carries out the review.
White said: “We are disappointed but not surprised about this delay.”