Speaking at the IMA’s chairman’s dinner on Thursday evening, Ferrans noted that the total compensation bill for such failures was approaching 500m before issuing his call for an investigation.
“There is a need for these events to be the subject of an independent review and for lessons to be learned,” he said.
“While we understand that legal and process issues may mean that such a review may not be able to start immediately, it will need to take place in due course and its conclusions must be published. It will then provide valuable lessons for the new Financial Conduct Authority to take on board as it starts its work.”
The issue has come to the fore again this year as the failures have meant intermediaries and investment managers have been saddled with significant bills via the Financial Services Compensation Scheme. The investment management industry alone has paid out 230m.
“Time and again when firms are asked what they need from the regulatory and business environment the answer comes back ‘stability’. Firms need to be able to plan and to invest with confidence that they will not be derailed by regulator or government-induced events. It is one of the tests by which, in a competitive global market, jurisdictions are judged,” Ferrans said.
“An unexpected bill for £230 million arriving out of left field comprehensively fails that test. Our regulators and legislators should be in no doubt about the impact that this episode has had not just in the UK but among global investment management firms around the world.”
Ferrans added that reform of the compensation scheme was “a matter of urgency” and said the IMA had submitted detailed ideas to the FSA on the subject.
