FCA will require individual investment firms to set aside funds to cover compensation costs
The UK Financial Regulatory Commission today announced proposals to require individual investment firms to set aside capital to cover compensation costs。
The Financial Conduct Authority (FCA) today announced proposals to require individual investment firms to set aside capital in order to cover compensation costs and ensure "who pollutes who pays" when consumers are harmed.。
The proposal would require individual investment firms (often referred to as investment advisers) to calculate their potential liabilities at an early stage, set aside sufficient capital to deal with them, and report potential liabilities to the FCA.。Any company that does not hold sufficient capital will be subject to automatic asset retention rules to prevent it from disposing of assets。
The Financial Services Compensation Scheme (FSCS) paid nearly 7% for poor advice from failed individual investment firms between 2016 and 2022..600 million pounds。95% of this is caused by 75 companies。
These recommendations are designed to ensure that investment firms pay for the remediation costs they incur。Firms offering poor advice will be liable to set aside sufficient funds to compensate。These set-aside funds, in turn, will provide a great incentive for businesses to offer good advice first and correct mistakes quickly。
Given that investment companies play an important role in the decisions people make for their long-term financial future, this will benefit consumers。
These recommendations build on existing capital requirements and are designed to be modest。These measures will exclude approximately 500 sole proprietors and unlimited partnerships from automatic asset retention requirements.。Companies that are part of a prudential regulatory group (where risk is assessed on a group-wide basis) will also be excluded。
The FCA would love to hear the views of the industry and other stakeholders on these proposals。Previously, the FCA had solicited opinions on the review of the consumer investment market and compensation framework and received more than 250 responses.。Recognizing the importance of doing this work well, the FCA extended the consultation period to 16 weeks.。In addition, extensive industry awareness programmes will be carried out。
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