Advisors to pay heavily for Lifemark failure

The FSCS has announced a £93m interim industry levy on investment advisors, mainly to compensate out-of-pocket Lifemark investors.

FSCS logoThe FSCS has announced a £93m interim industry levy on investment advisors, mainly to compensate out-of-pocket Lifemark investors.

The levy includes FSCS compensation costs of £86m and management expenses of £7m, with the total FSCS interim levy of £326m.

FSCS chief executive Mark Neale says: “We fully recognise the levy will come during what are undoubtedly difficult times for many firms. But we have a duty to compensate consumers who have eligible claims and need to levy the industry for the continuing costs of the failures so we can protect investors. No matter how difficult it may be, we have to meet our obligations to consumers.”

The FSCS announced it would compensate Lifemark investors in September 2010, despite the fact the group’s life settlement portfolios continue to run albeit with liquidity issues. In November the FSCS said it would consider Lifemark’s portfolios to contain no value at all for the purposes of calculating the payouts.

A group of 200 advisers earlier this month lost a judicial review of the FSCS’s decision to classify Keydata as an intermediary and levy the compensation bill on that sub-class.

The FSCS says in a statement: “The FSCS is pleased with the High Court decision that the scheme acted within its rules when it correctly raised the levy for the costs of Keydata claims on the investment intermediation sub-class… We recognise that the application raised issues about our funding and understand the concerns that financial advisers in particular have about the allocation of this levy. The FSCS has no power to deviate from the rules when allocating the costs of compensation, as the judgment confirms.”

The FSCS is set to announce its plan and budget for 2011/12 in February.

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