UK Financial Services Compensation Scheme completes investigations into Avalon

Maria Nikolova

The body has determined that valid claims exist against Avalon Investment Services.

The UK Financial Services Compensation Scheme (FSCS) has earlier today posted an update on the Avalon Investment Services Ltd case.

FSCS says it has now finished its investigations into Avalon. The investigations focused on the levels of due diligence Avalon carried out prior to allowing customers to make specific investments under their pensions. The Scheme has determined that valid claims exist against Avalon.

As a result, claims made against Avalon relating to the firm’s due diligence have now been moved to FSCS’s claims processing teams for assessment.

FSCS has earlier said it is investigating the practices of Avalon, specifically seeking to establish what levels of due diligence were carried out by the firm, prior to permitting customers to make specific investments under their pensions. FSCS has been working closely with the Financial Conduct Authority (FCA) and other firms to obtain documents that demonstrate the level of due diligence carried out by Avalon. The body said it was also working with legal counsel.

Avalon was placed into Special Administration in February 2016 and was later dissolved in August 2018.

FSCS is aware that some Avalon customers were advised by authorised independent financial advisers to transfer existing pensions into the Avalon SIPP. The Scheme also knows that others were advised by unauthorised firms. After the pension transfer, customers had their pension funds placed in high risk, non-standard investments. Some of these have since become illiquid, which means they cannot currently be sold or traded.

For FSCS to be able to pay one’s claim, the Scheme must prove that Avalon failed in its due diligence.

According to FSCS’s 2018/19 Annual Report, the Scheme paid a total of £473 million in compensation to 425,760 customers of failed firms during 2018/19. This amount compares with the £405 million FSCS paid in compensation in the previous year.

FSCS’s Report also shows the body raised levies on 49,224 regulated financial services firms, with a total levy income of £517 million, to fund the costs of compensation and of running the Scheme.

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