Declaring a firm in default opens the way for anyone who has lost money, as a result of dealings with such a firm, to make a claim for compensation to FSCS. The limit for investment compensation is £48,000.
Ron Devlin, interim chief executive of the FSCS, says: “FSCS' role is to protect customers of financial services firms. It is important for people to know that there is an organisation that can help if they have lost money and the firm can't pay.”
The declaration of default is the final part of a process whereby a regulated firm (for example, an independent financial adviser) is deemed by FSCS to be unable to pay claims for compensation against it. This is usually because it has insufficient assets, for example, because it has ceased trading or is insolvent.
FSCS is the UK's statutory single compensation scheme covering investments, deposits and insurance. It provides a fund of last resort for consumers who have claims against regulated firms that are unable to pay them.