AIFA: N&P Keydata refund should not set benchmark
The Association of Independent Financial Advisers said it was concerned the move might hit advisers and called on the FSCS to consult formally on “how and to whom this money should be refunded”.
Earlier this week N&P agreed to repay its customers who lost money when Keydata collapsed in 2009, with 30,000 UK investors losing a total of £450 million.
N&P advisers sold policies to 3,200 customers, all of whom will now receive their capital plus interest directly from N&P rather than from the FSCS.
Stephen Gay, director general of AIFA, said: “The news that Norwich & Peterborough Building Society has agreed to pay the FSCS to cover the cost of compensating investors after Keydata’s collapse is in line with the principle of the polluter pays.
“However, whilst the rules are clear that this money should reduce the levy on the industry we believe it is ambiguous at present as to how this refund should be allocated.
“We are therefore calling on the Compensation Scheme to formally consult on how and to whom this money should be refunded. Advisers have been hit extremely hard by the recent levy. The FSCS has an opportunity to ease the burden on firms.
“In seeking to recoup money the Compensation Scheme should not use this decision by Norwich & Peterborough as a benchmark for all advice given on Keydata. Each decision should be based on an individual assessment of the circumstances involved and the attitude, experience and sophistication of the investor.
“This ongoing uncertainty only serves to highlight the need for root and branch reform of the entire Compensation Scheme.”