AIFA calls for review of FSA procedures
The news that the Financial Services Compensation Scheme is to pay out up to £50 million, in addition to existing liabilities, risks breeching the cap placed on the investment intermediation sub class for the first time since the new scheme was introduced.
Chris Cummings, director general of AIFA said: “Keydata portrayed itself to be a product manufacturer yet the cost of its collapse is being picked up by the IFA profession. This is clearly an issue for the regulator as it has allowed a firm to position itself as one thing and yet be authorised as another. If this was known by FSA, which has to review each business plan of every firm seeking authorisation, then the firm should have been refused authorisation. If the firm’s plans changed post-authorisation, then this is another supervisory failing by FSA.
“FSA has recently stated that it is now scrutinising the firms it allows into regulation more carefully. We welcome this but feel a deeper, root and branch review is needed. For Keydata to fail so spectacularly must raise questions about how FSA was supervising this firm.
“We are now in discussion with our legal advisers over the decision to recover the compensation costs of Keydata from the investment intermediation sub class.”