FCA under fire for refusing FSCS levy reform

Greenwood said: “Their apparent dismissal of the proposal, on the grounds that it would require the drafting of new legislation, doesn’t make any sense. How can that possibly be cited as an excuse for not reforming something so urgently in need of improvement?

“The current system is fundamentally flawed, so if a much fairer, feasible alternative is available, it should be investigated. The end surely outweighs the means? 

He added that "hiding behind the need for parliamentary intervention is deliberately evading the issue" and that as costs are increasing, "the impact on small and large firms is becoming untenable".

Greenwood continued: "Even more frustratingly, the levy is currently  being paid by those who did not cause the problem. The ‘innocent’ are paying for the ‘guilty’.

“The promise to look at ‘smoothing out’ completely fails to address the underlying problem. Meanwhile, a risk-based solution would simply result in people trying to manoeuvre around any obstacles and ironically encourage consumers to be reckless – in the knowledge that if everything backfires, they’ll simply get their money back."

Instead, Greenwood proposes the FSCS should be funded by a premium charged on products and investments, "which would be more rational and transparent than advisers continually having to factor on  - going increases into their fee structures".​

He added: “Similar schemes work perfectly well in other sectors, such as the Motor Insurance Bureau and the Pension Protection Fund. Adopting one in financial services would fund the compensation scheme and support education initiatives aimed directly at the consumer.”