'Platforms should contribute to FSCS levy' - Ken Davy
Ken Davy has called on platforms to contribute to the Financial Services Compensation Scheme's (FSCS) levy alongside advisers, in response to the regulator's consultation on the scheme's funding system.
If both platforms and product providers contributed to the funding of the FSCS, the SimplyBiz Group chairman argued, it would give them a "significant" incentive to monitor and whistle-blow on those who are suspected of acting against consumers' interests. He suggested this could be done through a central Association of British Insurers facility.
He added: "By definition, the FSCS is picking up the liabilities of failed intermediary firms - therefore those firms that fail do not contribute to the liabilities they create.
"This places virtually the entire cost on the remaining intermediary firms who have no way of controlling, influencing or even being aware of the perpetrators who have created the liabilities. This is unfair in the extreme."
Davy also said the group would like to see additional levies imposed on those promoting unregulated investments, arguing "they are a significant contributing factor to the FSCS liabilities".
SimplyBiz also entered into the professional indemnity (PI) debate in its response to the Financial Conduct Authority's (FCA's) consultation, but took a less active stance than the Personal Finance Society did earlier this week when it suggested a joint FSCS-PI fund pool.
Davy said: "The issues surrounding the effectiveness of PI insurance cover and its role when firms fail is a practical and legal minefield and care needs to be taken as regards changes that may produce unintended consequences."
The FCA has not been shy in outlining issues with PI policies in recent months, namely its "concerns" about "clear non-compliance" and "inadequate policy limits or exclusions that exclude all activity".
SimplyBiz, however, said PI insurance should not have mandatory features "over and above" those that already exist.
Davy added: "The challenge is one of making the offering of more comprehensive cover sufficiently attractive to providers, and extending competition, without disproportionately increasing premiums or reducing market choice.
"One solution that could be considered by the FCA, in view of the increased capital adequacy requirement, is increasing the requirement for a £5,000 excess to one of £10,000. This would have the effect of enabling PI insurers to widen the risks they accept and reduce the likelihood of policies being made void."
The FCA's consultation on the FSCS's funding system closed on 31 March.