The rules for the FSCS were last reviewed in March 2013, but since then, the scale and impact of FSCS levies have risen sharply for some firms.
The regulator is also proposing to change the funding classes for advisers offering riskier advice, which have tended to attract the most claims to in turn, pay a higher amount.
The FSCS is the UK’s statutory compensation scheme of last resort, which can step in when an authorised financial services firm is unable, or likely to be unable, to pay claims against it. Firms from across the financial services industry pay levies to fund both the FSCS’s operating costs and the compensation it pays out.
Christopher Woolard, executive director of strategy and competition at the FCA, said: “We want to ensure protection for consumers and fairness for firms that pay for the compensation. We want to have a full debate with all interested stakeholders and this paper sets out the range of fundamental issues we want to discuss.”
The FCA is asking for feedback on the professional indemnity insurance (PII) market and the coverage that it provides as the regulator is considering adding some mandatory terms to policies.
The regulator is considering:
• introducing product provider contributions towards intermediation claims
• changing the FSCS funding classes for intermediation activities
• updating limits on consumer coverage in light of the pension freedoms
• exploring the potential for FSCS levies to better reflect the risks posed by particular practices
The FCA is also consulting in CP16/42 on a number of specific proposals to change rules affecting the scope and operation of FSCS funding, including:
• amending payment arrangements so that firms may be asked to pay a proportion of the levy on account
• introducing FSCS coverage for debt management firms
• extending coverage to fund management
• applying FSCS protection to advice and intermediation of structured deposits
• ensuring that FCA rules include Lloyd’s of London in certain circumstances
The FCA is asking for responses to its consultation paper by 31 March 2017 before publishing final rules and a further consultation paper on proposed rule changes in Autumn 2017.
