RegulationMay 31 2016

Product levy ruled out in FSCS review

twitter-iconfacebook-iconlinkedin-iconmail-iconprint-icon
Search supported by
Product levy ruled out in FSCS review

The regulator lacks the power to introduce a product levy as part of its Financial Services Compensation Scheme review, the chief executive of the Personal Finance Society following talks on the issue.

Keith Richards said meetings with the Financial Conduct Authority have revealed the introduction of such a levy would require legislation, putting it outside the scope of the current study.

He said: “Amending the FSCS levy is within the scope of the review but anything that would require legislative change is outside that scope.

“That doesn’t mean it cannot be put to the government for consideration but it would have to be a government decision.

“The FCA is open-minded to more proposals and suggestions. What was really important was the demonstation of how willing they are, including the FSCS themselves, to come up with alternatives.”

Mr Richards said the news the FCA could not introduct a product levy should not make advisers think the process will be in vain, adding the regulator could act to smooth the current system so the levy doesn’t increase and decrease dramatically.

He also added he had spoken to HM Treasury about a product levy during the Financial Advice Market Review consultation, but said there was “no particular reaction” to the idea and he was told civil servants would consider “any reasonable proposals”.

A product levy is popular among advisers and would be attached to the transaction and sale of product which would be added to its price and paid by the consumer.

The chief executive of the FSCS has previously said he is opposed to the introduction of a product levy.

Mark Neale said those that advocate a product levy would need to think about how this would be justified to product providers and to unadvised consumers of those products.

In March acting FCA chief executive Tracey McDermott said the review of the FSCS levy, which has recently begun, would probably take a year.

A spokeswoman for the FCA declined to comment.

Adviser view

Dan Clayden, director of Devon-based Clayden Associates, said: “I don’t envy the people who are trying to come up with the perfect solution for this. There are obvious benefits to the product levy but it won’t solve everything and I don’t think there is necessarily a solution that will please everyone.”