IFAs to foot compensation bill for mis-sold shares

28 January 2009

The Financial Services Compensation Scheme has today declared stockbroking firm Pacific Continental Securities in default and has encouraged PCS customers to start compensation claim proceedings.

The FSCS wants to raise a £40m levy from the ‘investment intermediation’ category which PCS falls under as part of the fees paid to the Financial Services Authority.

This would cover the costs of this and any other future compensation claims within the investment intermediation category.

But AIFA has expressed concerns that many IFA firms fall into this category as well, and so would be expected to foot the £40m levy.

Chris Cummings, director-general of AIFA, says: “We have a genuine concern that the combined impact of these fees and falling revenues will put members under severe financial strain.”

Cummings says there are questions that need to be answered by the regulator about how this company was allowed to operate.

He adds: “We must ask the FSA why this firm was allowed to gain authorisation and then operate a flawed business model for so long.

“This seems to be yet another case of regulatory failure and the fault must be acknowledged by FSA.

“Good firms are now being forced to pay for the misdeeds of bad ones. An immediate inquiry into the circumstances that led up to this situation is needed. Further, we expect FSA to come to the table with proposals for helping firms meet this new, unexpected levy.”

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