Following its December 2016 consultation for views on how FSCS funding could be reformed, FCA has published a further consultation paper seeking to ensure FSCS continues to provide the right protections, works effectively and is funded fairly. Proposals under consultation include:
- Merging the Life and Pensions and Investment Intermediation funding classes;
- Requiring product providers to contribute around 25% of the compensation costs which fall to the intermediation classes;
- Moving pure protection intermediation from the Life and Pensions funding class to the General Insurance Distribution class; and
- Increasing the FSCS compensation limit to £85,000 for investment provision, investment intermediation, home finance intermediation and debt management claims.
Final rules (consulted on in the December 2016 paper) have also been confirmed, including:
- Introducing FSCS coverage for debt management firms;
- Extending coverage in respect of fund management;
- Applying FSCS protection to advice and intermediation of structured deposits;
- Requiring the Society of Lloyds to contribute to the retail pool;
- Introducing additional reporting requirements which will potentially enable the FCA to introduce risk-based levies in the future; and
- Amending payment arrangements.
Other options for protecting consumers have been proposed, including incentivising firms not to carry out activities for which they have no professional indemnity insurance (PII) cover. FCA is also consulting upon requiring certain Personal Investment Firms (PIF) to pay money into a trust account or purchase a bond that would ensure more claims are paid for by firms or their insurers, and or possibly preventing PIFs from purchasing PII policies which contain exclusions for the insolvency of the firm or any related party.
FCA has provided an online response form for the consultation paper; the deadline for comment is 30 January 2018.