§ Mr. Matthew BanksTo ask the Chancellor of the Exchequer if he will make a statement about the investors' compensation scheme. [33089]
§ Mr. NelsonThe Treasury has today laid a minute to inform the House that the Treasury has issued a guarantee to the investors compensation scheme, ICS, for up to £17 million.
This wholly exceptional course, which I very much regret the need to take, results from the current judicial review case brought by Sun Life. This challenges certain regulatory rules made by the Securities and Investments Board, SIB, and the Personal Investment Authority, PIA, which is one of the self-regulating organisations recognised by SIB under the Financial Services Act 1986. Mr. Justice Collins yesterday gave 206W Sun Life leave to proceed with the case, which will be heard on 23 to 24 August.
Because of the uncertainty created by this case, the PIA has decided, after taking legal advice, that it would not be prudent to levy its members to provide finance for the ICS as it would normally do. For similar reasons, the ICS board has also decided not to levy PIA members direct. Without the Treasury guarantee, the ICS would be unable to borrow commercially because of the same uncertainty about its ability to raise funds to service and repay loans.
The Treasury guarantee is for £17 million, slightly more than the £15.8 million ICS levy on the PIA, to cover interest which may be incurred and the legal costs associated with the court case.
The Treasury will review the need for the guarantee when the judicial review case is resolved after the hearing in August. In the meantime, the ICS will continue to operate normally, making offers of compensation to investors who have lost as a result of defaults by investment firms, and declaring firms in default in order to trigger claims, as usual. Investors can be confident that this important safety net will continue to function properly, underpinning investor protection.