FSA consults on start of single compensation scheme

Clifford Chance, London

The Financial Services Authority (FSA) has issued a consultation paper (CP 72) seeking views on speeding up the establishment of the new single Financial Services Compensation Scheme (FSCS) by bringing it into operation in February 2001 before the full implementation of the Financial Services and Markets Act 2000 (FSMA). The FSCS would replace the various schemes which currently provide compensation to investors, policyholders and depositors in the event of the failure of authorised firms. The transition process would not affect the funding of existing compensation arrangements and new Scheme rules will come into effect when FSMA is fully implemented in 2001. The FSCS would replace the Investors Compensation Scheme (ICS) and assume responsibility for managing the compensation scheme for investors. The other compensation schemes would arrange for their operations to be managed by the FSCS under service level agreements until FSMA takes full effect. The consultation period ends on 15 December 2000.