SFA Update: Changes to the Investor Compensation Scheme

United Kingdom
Following the implementation of the new Investor Compensation Directive, SFA has recently finished a consultation with members over how the ICS should adapt to the fact that it will now include branches of UK firms operating elsewhere in the EEA, and (if the branches so elect) cover inwardly passported EEA firms. It is proposed that branches of UK firms operating in the EEA are included in the levy calculation, whereas UK branches of inwardly passported EEA firms should only be brought into the levy process if they have elected to top up their cover to ICS levels (as they can do under the Directive). If these proposals are implemented following the consultation, SFA expects the effect on the levy paid by regulated firms to be marginal.

SFA has also issued guidance which will require firms to amend their standard wording on the availability of a compensation scheme. This is because the Investor Compensation Schemes Directive links the provision of compensation to authorisation. In other words, a firm's home state is required to ensure that its scheme provides compensation for investors who do business for the firm anywhere in the EEA. The wording of the new disclosure is contained in Board Notice 493.