PIMFA has implored the Financial Conduct Authority to immediately reduce the cost of the Financial Services Compensation Scheme, after labelling the current system “unsatisfactory.”
The trade association has proposed that the FCA fines imposed on firms for regulatory failures contribute to funding the FSCS rather than be paid to the Exchequer. According to PIMFA, this would either limit FSCS levy increases to a more manageable level or potentially reverse FSCS levy increases altogether.
It called the ever-increasing FSCS levy “the clearest indicator of consumer detriment” and said work is needed to improve the regulation and supervision of the advice sector.
Tim Fassam, director of government relations and policy, PIMFA, said: “The consumer investment market plays a vital role in helping people prepare for the future, with many PIMFA members providing exceptional products and services. But recent years have shown the harm that can be done to consumers when the market goes wrong with well-run firms picking up the bill via the FSCS.
“The FCA have shown they agree with PIMFA on many of the areas that require action but our members have been raising concerns for years and cannot be expected to wait years for action. Having the polluter pay via FCA fines ensures a quick reduction that ensures industry support for the much-needed longer-term reform.”
PIMFA is also calling for the FCA and FSCS to increase efforts to recover funds from firms or schemes that have failed and ensure they take action in all cases that could reduce a potential levy payment for firms in the same class. According to PIMFA, the producer of any product that could be eligible for compensation under the FSCS should contribute to the cost of the scheme.
Furthermore, PIMFA said it would like to see the regulator crack down on firms for criminal offences, arguing that there is a greater need for deterrence in the market and firms need to be aware that they could potentially face criminal prosecution.