Upping FOS compensation could ruin small brokers
The Financial Services Authority's (FSA) proposal to increase the maximum level of Financial Ombudsman Service (FOS) compensation to £150,000 may force small brokers out of business, legal experts have warned.
The original limit of £100,000 was set by the Insurance Ombudsman Scheme in 1981 and was adopted by the FOS when it was set up in December 2001.
Jonathan Davies, partner at RPC, commented: "Increasing the ombudsman's maximum penalty by this level would put many IFAs and brokers at risk of closure."
The FSA requires firms to hold professional indemnity (PI) insurance including cover for Ombudsman's awards. Mr Davies said if firms were unable to obtain cover from reluctant PI insurers, they would
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