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Trade body seeks FCA view on Merchant FSCS claims

The UK Structured Products Association has said it is seeking a view from the Financial Conduct Authority on whether investors that purchased products from defunct Merchant Capital can take their claims to the Financial Services Compensation Scheme.

The trade body said many across the sector had asked whether they would be able to make a claim through the FSCS following Merchant Capital and, subsequently, its parent company Merchant House Group falling into administration.

Last week, former Merchant Capital custodian Reyker Securities announced that investors in plans previously held by the provider are to be hit by a fresh wave of fees.

Merchant House’s fall into administration in April was precipitated by Reyker issuing a winding up order, after the group failed to pay administration fees relating to plans taken on by Reyker following Merchant Capital’s collapse in January.

Reyker said it would have to levy new fees despite investors having paid in their initial purchase price because Merchant House was no longer able to meet its obligations.

UKSpa said it was in discussions with the regulator to gather information on “what has led Reyker to their decision to charge investors additional fees”, amid calls from some for the FCA to force providers to ring fence admin fees paid up front.

A spokesperson for UKSpa said: “Whenever a company goes into administration and investors are either at risk of loss or asked to pay additional fees, this is never a good outcome.”

Adrian Barnwell, head of risk management and strategy at Reyker, previously told FTAdviser that he doubts it will be possible for investors to claim through the FSCS.

He said: “There certainly was the opportunity to claim in relation to Keydata and Pritchard but it relates to the loss of the actual investments.

“Those investments are still there and aren’t affected. I don’t think we can really say that there has been a loss to the investments, a loss in effect to what consumers paid for the management of those investments by the promoters. The promoters failed.

“I am not in a position to comment on the FSCS aspect really but looking at it from a common sense point of view, I think it might be difficult to sustain a claim, even going back to the Keydata ones.”

A spokesperson for UKSpa said: “We are interested to see what the regulator’s view is on whether that should be the case in this instance, and how the industry can work better at mitigating the risk if it isn’t possible.”

“UKSpa would stress that, based on the facts at hand, this is not an issue with the underlying products themselves but rather an issue with the firms involved in administering and providing custodial services for the products.”