The Investment Management Association (IMA) and the Association of Private Client Investment Managers and Stockbrokers (APCIMS) have strongly opposed the FSA's proposed changes to the FSCS sourcebook, stating that a much wider review is required to tackle all the central issues facing the scheme simultaneously.
The trade bodies argued that the proposals fail to consider the impact of cross-subsidy, as occurred when asset managers had to find £233 million to contribute to the £333 million needed in 2011 for intermediary defaults.
Any wider review must consider the appropriateness of recovering extremely high levels of compensation claims. The IMA and APCIMS would expect the FSA to consider whether improvements can be made to the supervisory processes to mitigate the risk of future claims.
Guy Sears, IMA Director of Wholesale, said:
"We're disappointed to see that the bulk of the proposal concentrates on improving administrative processes within the FSCS at a time when the scheme rules need a complete overhaul. These areas should be suitably addressed under one extensive review to ensure the rules operate to provide protection, that the scheme secures appropriate funding and that consumers understand the nature and extent of any protection."
Ian Cornwall, APCIMS Director of Regulation, said:
"The proposals appear to address a limited number of ad hoc issues associated with the FSCS and it is unclear why it has been published now given a further consultation paper on the FSCS is due to be published shortly. Certain issues, such as the definitions of eligible claimants, addressed in the current consultation paper may also need to be revisited in the further consultation."
The FSA is due to provide feedback on all the responses to the consultation at the end of September 2012.
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