In PS11/17, the Financial Services Authority (FSA) placed regulated individuals working within solicitors’ firms under the FSA and the Financial Services Compensation Scheme from December 2011.
Until now, these advisers were regulated by the Solicitors Regulation Authority (SRA) and covered by the Solicitors Compensation Scheme (SCF).
The rule change covers solicitors who also carry out regulated financial services activities alongside their legal work, such as offering mortgage brokerage alongside conveyancing or tax planning alongside will-writing.
Ian Cockerill, compliance director of Solicitors Independent Financial Advice (SIFA), said the move could lead solicitors firms to hive off their financial services or simply stop offering them through internal staff members.
“This will mean solicitor firms must pay an extra levy to the FSCS, on top of the one they pay to the SCF, so they may hive off their IFA business,” he said.
“Clients may now need to seek advice from another IFA.”
Cockerill said the FSCS is far less generous than the SCF was.
“Clients are being downgraded. The SCF did not ask any questions about claims of under £1m,” he said.
He added it is unlikely the regulatory change will have an effect on other IFAs.
