For immediate release: Thursday 22 June 2006

IMA CALLS FOR FURTHER REVIEW OF THE FUNDING OF THE FINANCIAL SERVICES COMPENSATION SCHEME

IMA has submitted its response to the FSA’s Financial Services Compensation Scheme (FSCS) Funding Review.  It points out that while the reasons for the review are understandable it has been hindered by the omission of any indication of cost implications which may arise as a result of a change of the funding structure.

The FSA’s review highlights a number of possible options which would group firms together by the type of business being carried out (e.g. investment business, life business etc) rather than the existing system which groups firms by their activity or function. Grouping in this way is a matter of concern because of the potential for IMA member firms cross-subsidising firms in other sectors.

Richard Saunders, Chief Executive of the IMA commented:

“We understand the reasons for a review, but without some indication of the cost implications for firms of the various options, it is impossible to assess their impact.  If IMA member firms are to be asked to cross-subsidise other sectors they need to know how much money might be at stake. We are therefore seeking a further round of discussion before a consultation paper is published.”

Full text of IMA’s response to the FSA’s Financial Services Compensation Scheme Review is attached.

-Ends-

Notes to editors:
1. The FSCS funding review arose as a result of pressures in the financial advisory sector, with number of claims causing signficant increases in intermediary fees to the FSCS. The issue could have the potential to drive advisers out of the market. The review paper highlights a number of possible options to try and counteract this.
 
For further information, please contact:
Helen Stephenson, Communications Officer, IMA, 020 7831 0898

Out of hours contact:
Mona Patel, Head of Communications, IMA, 07834 089332