"This represents another form of the ‘polluter pays’ approach and would reduce the burden well-run firms currently face to pay for the regulatory breaches of others."
Aegon has previously argued that providers and fund managers should take some of the burden of FSCS levies from advisers by paying a greater share of the overall costs.
It is now proposing that FCA fines be kept ‘within the industry’ to subsidise the FSCS, as well as lowering the threshold level when intermediary levies trigger support from the wider ‘retail pool’.
Steven Cameron, Pensions Director at Aegon said: “We see a strong case for the FSCS scheme to be part-funded from fines imposed by the FCA on firms which operate in the same markets the FSCS covers.
“The FCA is currently required to pay fines, minus enforcement costs, to the Exchequer. The fines, which have totalled £3bn in the last four years, often result from failings by regulated firms, which may involve consumer detriment, and are paid on top of any necessary financial redress.
“Rather than fines going into a central Government slush fund, we are calling for the Treasury to pay a contribution from them into the FSCS, to be used to compensate consumers who suffer financial loss at the hands of a small minority of ‘failed’ firms. This represents another form of the ‘polluter pays’ approach and would reduce the burden well-run firms currently face to pay for the regulatory breaches of others.
“We also support the FCA’s proposal to require providers to pay a greater share of FSCS costs and would extend that to fund managers. As well as the options set out in the consultation, the FCA could reduce the threshold level of intermediaries’ levies that triggers a call on the wider retail pool. This could focus the retail pool’s role where it’s most needed, when intermediaries face unusually high claims, while also limiting the volatility in intermediary levies year on year.
“Any measures which reduce the FSCS levy burden on intermediaries should also allow adviser firms to reduce their charges, thus benefiting consumers and helping to close the advice gap.”
