The FCA's consultation on reviewing the funding of the FSCS is right to propose that product providers should contribute to the cost of the intermediation class, but it wrongly assumes every firm within the investment provision class is a product provider, according to PIMFA.
Furthermore, PIMFA said the proposal fails to recognise there are firms within this class who are conducting discretionary business for eligible clients who are not product providers.
"In our discussions with the FCA it appears to be under the impression that the provision of discretionary services to eligible clients generally arise as a result of referrals from intermediaries," PIMFA director of UK regulation Ian Cornwall said.
"Whilst some discretionary business does arise from referral from intermediaries (and many discretionary firms also refer business to intermediaries) a significant proportion of discretionary business does not arise from referrals from intermediaries. The proposals needs to be modified so that firms who are not product providers are excluded."
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