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Judicial review of Financial Services Compensation Scheme's exercise of power to impose compensation costs levy


  • Joanna Gray


Purpose - The purpose of this paper is to discuss the judicial review of Financial Services Compensation Scheme's (FSCS) exercise of power to impose compensation costs levy ( Design/methodology/approach - The paper describes the judicial review action. It arose out of the FSCS imposition of an interim levy of some £32 million to defray compensation costs arising from the default of Keydata Investment Services Ltd (Keydata) and the claimants impugned, as wrong in law and procedurally incorrect, its decision in March 2010 to allocate the costs of that levy to be borne by those firms that the FSCS classified as “investment intermediaries”. The paper gives details of the decision. Findings - The claimants argued that the error in law or irrationality were constituted by the FSCS's determination that: first, the costs of the Keydata claims arose or could be expected to arise out of one or more of the four regulated activities in the D2 sub-class to which FSCS referred in its reasoning behind its decision. Rather, the claimants argued, the true position was that the claims did not arise out of any of these activities but arose out of Keydata's marketing of its plans; and second, the costs did not arise and could not be expected to arise out of any D1 sub-class activity of “managing investments”. Originality/value - This decision illustrates the increasing difficulty of drawing a clear line between discretionary management and agency broking, for the claimants made a strong argument that Keydata should be considered to have been much more than a passive distribution conduit or channel.

Suggested Citation

  • Joanna Gray, 2011. "Judicial review of Financial Services Compensation Scheme's exercise of power to impose compensation costs levy," Journal of Financial Regulation and Compliance, Emerald Group Publishing, vol. 19(2), pages 195-204, May.
  • Handle: RePEc:eme:jfrcpp:v:19:y:2011:i:2:p:195-204

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