Mills added: "We are already taking action against the drivers of compensation claims. These include our measures to reduce the impact when firms fail and to tackle misconduct in the investment market."
Within the paper, the FCA also suggested individuals considered to be either ‘high net worth’ or ‘sophisticated’ could be excluded from FSCS protection in certain scenarios.
The FCA said it could be argued that these investors might be expected to have the means to absorb losses or take their own private action against a failed firm and therefore should not be entitled to compensation.
Meanwhile, the FCA has also floated the idea of excluding investment advice from FSCS protection as one way of reducing the burden of the levy - in line with other jurisdictions.
It said many of the claims driving compensation costs related to historic misconduct by firms in the investment sector, including financial advisers and self-invested personal pension operators, which have subsequently failed.
Last month, the FSCS forecasted a levy of £900m for 2022/23, as advisers will yet again contribute the maximum £240m.
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