FCA scraps plans to exclude retail LTAF from FSCS cover
FSCS cover provides compensation of up to £85,000 in the event that a regulated firm goes out of business.
In its feedback statement published today (30 October), the regulator said that following input from several industry players, it will not seek to exclude LTAFs from FSCS cover, which provides compensation of up to £85,000 in the event that a regulated firm goes out of business.
Despite arguments in favour of the exclusion — such as the high investment risk of LTAFs; the existence of risk appetite assessments, financial advisers' need to undergo suitability exercises and bringing down the high FSCS levies — the move will not take place.
The decision follows a consultation that began this summer, allowing the regulator to consider next steps before approval of any potential LTAFs that will promote to retail investors.
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During the consultation, some respondents said removing FSCS cover from LTAFs could «undermine the work of developing LTAFs for retail, their potential success and could impact consumer confidence, which is at odds with the aims of broadening access to retail customers».
They noted there were already several barriers to bringing the retail LTAF to market — including the need for platforms to invest in technological change; the application of the Consumer Duty to new products and distribution channels; and manufacturers' need to invest in targeting the LTAF to a retail target market and seek approval from the FCA.
Moreover, removing LTAFs from FSCS cover «would only add another material barrier to the distribution of LTAFs that may make take-up unattractive».
Players also stated that singling out LTAFs as a
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