Authority seeks views on shake-up of Financial Services Compensation Scheme

The FSA has issued a consultation paper setting out proposals on how it can use controversial new powers granted by the Financial Services Act 2010.

The consultation paper includes proposed changes to the FSA Handbook enabling the Financial Services Compensation Scheme (FSCS) to recoup its management costs, when acting on behalf of other compensation schemes, from FSCS levy payers if it is unable to recoup those costs from the relevant compensation scheme.

Another new rule will reflect the Treasury’s new power to recoup interest costs from the FSCS in the event of it requiring the FSCS to contribute to the costs incurred in applying the stabilisation powers of the Special Resolution Regime established under the Banking Act 2009.

The FSA is also consulting on powers to

  • suspend firms or individuals by stopping them undertaking some or all of the activities which they are permitted to carry on for a period of time, and to use this new power together with other enforcement tools
  • impose financial penalties on individuals who have carried out controlled functions without the necessary approval from the FSA
  • gather information in relation to financial stability from both authorised and unauthorised persons to help identify potential threats to the UK financial market

The consultation closes on 25 June 2010.

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