Financial Services Compensation Scheme (FSCS): Difference between revisions

From binaryoption
Jump to navigation Jump to search
Баннер1
(@pipegas_WP-output)
 
(No difference)

Latest revision as of 16:40, 28 March 2025

  1. Financial Services Compensation Scheme (FSCS)

The Financial Services Compensation Scheme (FSCS) is a UK-based statutory fund that protects consumers when an authorised financial firm fails. It is a crucial component of the UK’s financial regulatory framework, designed to maintain confidence in financial services and safeguard individuals’ money. This article provides a comprehensive overview of the FSCS, covering eligibility, coverage limits, claim procedures, and related considerations for beginners.

What is the FSCS?

The FSCS is an independent body, funded by levies paid by financial services firms authorised by the Financial Conduct Authority (FCA). It's *not* a government department, though it operates within a statutory framework set by Parliament. Its primary purpose is to compensate customers if a firm is unable to meet its obligations – for example, if it goes out of business, stops trading, or commits fraud. Without the FSCS, consumers would bear the full financial risk of firm failure, potentially leading to significant losses and erosion of trust in the financial system.

Think of it as an insurance policy for your financial products, but one that the firms themselves pay for, not you directly. This differentiates it from personal insurance policies like building and contents cover.

Who is Protected by the FSCS?

The FSCS protects eligible claimants who are consumers. This broadly includes:

  • **Individuals:** This is the most common category, covering personal customers.
  • **Small businesses:** Certain small businesses are also protected, but with lower compensation limits (explained later). The definition of a small business is based on factors like turnover, balance sheet total, and number of employees. A business is generally considered small if it meets at least two of the following criteria:
   * Turnover: not more than £6.5 million
   * Balance sheet total: not more than £5 million
   * Number of employees: fewer than 50
  • **Charities:** Charities with a total income not exceeding £1 million are generally eligible for protection.
  • **Trusts:** Certain types of trusts may also be covered.

It’s important to note that the FSCS *doesn’t* protect investments made through unregulated firms or schemes. Always check if a firm is authorised by the FCA before investing – you can use the FCA's Financial Services Register to do so. This register is a public record of all firms authorised to conduct financial services in the UK.

What Types of Financial Products are Covered?

The FSCS covers a wide range of financial products and services, but not all. Here's a breakdown:

  • **Deposits:** Money held in bank accounts, building society accounts, and credit unions are covered up to £85,000 per person, per banking institution. This is a key element of deposit insurance.
  • **Insurance:** Policies like home insurance, car insurance, and life insurance are protected.
  • **Investments:** This is the most complex area. The FSCS covers certain investment products, including:
   * **Stocks and Shares ISAs:** Individual Savings Accounts investing in stocks and shares.
   * **Unit Trusts and OEICs (Open-Ended Investment Companies):** Collective investment schemes.
   * **Investment Bonds:** Certain types of investment bonds.
   * **Pensions:**  Some pension schemes are covered, but the rules are complex.
   * **Home Finance:** Mortgages and other secured loans.
  • **Consumer Credit:** Loans, credit cards, and hire purchase agreements are covered.

However, the FSCS *does not* cover:

  • **Purely Investment Products:** Certain complex investments, such as high-risk unregulated investments like cryptoassets, are generally not covered. Understanding risk management is crucial here.
  • **Exchange Traded Derivatives:** Futures and options traded on recognised exchanges are generally excluded. Learning about technical analysis can help assess risks in these markets.
  • **Commercial Investments:** Investments made by large businesses are typically not covered.
  • **Foreign Exchange Trading (Spot):** While firms offering FX trading must be authorised, the underlying spot trades themselves are generally not covered by the FSCS. However, client funds held by the firm *are* covered as deposits.
  • **Buy-to-Let Mortgages (for business purposes):** Mortgages taken out for business purposes are not covered.

Compensation Limits

The amount of compensation you can receive from the FSCS depends on the type of product and your status as an individual or a small business.

  • **Deposits:** £85,000 per person, per banking institution. This is aligned with the European Union's deposit guarantee scheme.
  • **Insurance:** £85,000 per claim.
  • **Investments (Individuals):** £50,000 per firm. This means if you have investments with a firm that fails, you can claim up to £50,000. If you have investments with multiple firms, you are covered up to £50,000 *per firm*. Diversification, a key principle of asset allocation, can mitigate risk here.
  • **Investments (Small Businesses):** £25,000 per firm. Small businesses receive a lower level of protection.
  • **Consumer Credit:** £85,000 per account.

These limits apply to the *net loss* you have suffered. This means the FSCS will consider any money you have already received back from the firm in question or from other sources. Understanding fundamental analysis can help you make informed investment decisions and potentially reduce losses.

How to Make a Claim

If you believe you are eligible for compensation from the FSCS, here's the process:

1. **Check FCA Authorisation:** First, confirm the firm was authorised by the FCA at the time it failed. Use the FCA's Financial Services Register. 2. **Contact the Firm:** Try to contact the firm directly to understand the situation and see if they can resolve the issue. 3. **Contact the FSCS:** If the firm is unable to resolve the issue, contact the FSCS. You can do this online, by phone, or by post. The FSCS website ([1](https://www.fscs.org.uk/)) provides detailed information and claim forms. 4. **Gather Evidence:** You will need to provide evidence to support your claim. This may include: 

   * Account statements
   * Policy documents
   * Correspondence with the firm
   * Proof of identity

5. **FSCS Assessment:** The FSCS will assess your claim and determine if you are eligible for compensation. This process can take time, especially for complex cases. They will consider factors like market volatility and the overall financial situation. 6. **Compensation Payment:** If your claim is approved, the FSCS will pay you the compensation you are entitled to.

Important Considerations and Common Scenarios

  • **Joint Accounts:** If you have a joint account, the compensation limit applies per individual, not per account. So, a joint account with £100,000 is covered up to £85,000 per account holder.
  • **Multiple Accounts:** Having multiple accounts with the same institution doesn't automatically mean you are covered for more than £85,000 (for deposits). The FSCS considers whether the accounts are legally separate.
  • **Fraudulent Activity:** If you are a victim of fraud, the FSCS may be able to compensate you, but you may also need to report the fraud to the police. Understanding candlestick patterns and other technical indicators can help identify potential fraudulent activity.
  • **SiPP (Self-Invested Personal Pensions):** Compensation for SiPPs can be complex. The FSCS will consider the actions of the SiPP operator and the underlying investments.
  • **Claims Timelines:** There are strict time limits for making claims to the FSCS. It's important to act quickly. Keep an eye on economic calendars for significant events that might impact your investments.
  • **Complex Products:** If you have invested in complex products, it’s crucial to understand the risks and seek independent financial advice. Resources on Fibonacci retracement and other advanced technical analysis tools can be helpful.
  • **Understanding Leverage:** Using leverage (borrowed funds) can amplify both gains and losses. The FSCS will only compensate for the actual amount invested, not the potential gains you might have made. Learning about risk-reward ratios is essential when using leverage.
  • **Correlation Analysis:** Understanding how different assets correlate can help you diversify your portfolio and reduce risk. The FSCS doesn’t protect against market losses due to correlation.
  • **Moving Averages:** While understanding moving averages can help identify trends, they don't guarantee profits and the FSCS won’t compensate for losses incurred while using this indicator.
  • **Bollinger Bands:** Similarly, using Bollinger Bands for trading doesn't eliminate risk, and the FSCS won't cover losses resulting from their use.
  • **MACD (Moving Average Convergence Divergence):** The FSCS doesn't cover losses arising from trading decisions based on the MACD indicator.
  • **Relative Strength Index (RSI):** Trading based on the RSI indicator still carries risk, and the FSCS won't compensate for related losses.
  • **Elliott Wave Theory:** Utilizing Elliott Wave Theory for investment decisions doesn't guarantee success, and the FSCS won't cover resulting losses.
  • **Ichimoku Cloud:** Trading strategies based on the Ichimoku Cloud indicator are subject to market risks, and the FSCS doesn't provide coverage for related losses.
  • **Volume Weighted Average Price (VWAP):** Using VWAP for trading doesn't eliminate risk, and the FSCS won't compensate for related losses.
  • **Pivot Points:** Trading based on pivot points still carries risk, and the FSCS doesn't cover losses incurred using this method.
  • **Support and Resistance Levels:** Identifying support and resistance levels is a common trading technique, but the FSCS won’t compensate for losses based on these levels.
  • **Head and Shoulders Pattern:** Recognizing the Head and Shoulders pattern doesn’t guarantee a profitable trade, and the FSCS won’t cover related losses.
  • **Double Top/Bottom Patterns:** Trading based on Double Top/Bottom patterns still involves risk, and the FSCS doesn’t provide coverage.
  • **Triangles (Ascending, Descending, Symmetrical):** Using triangle patterns for trading doesn’t eliminate risk, and the FSCS won't compensate for related losses.
  • **Gaps (Breakaway, Continuation, Exhaustion):** Trading based on gap analysis carries risk, and the FSCS doesn't cover related losses.
  • **Doji Candlestick:** Identifying Doji candlesticks doesn’t guarantee a profitable trade, and the FSCS won’t compensate for related losses.
  • **Hammer/Hanging Man Candlestick:** Trading based on Hammer/Hanging Man candlesticks still involves risk, and the FSCS doesn’t provide coverage.
  • **Engulfing Candlestick Pattern:** Utilizing the Engulfing candlestick pattern for investment decisions doesn’t guarantee success, and the FSCS won’t cover resulting losses.


Resources


Financial Conduct Authority Deposit insurance Financial regulation Investment risk Asset allocation Risk management Technical analysis Fundamental analysis Market volatility Economic calendar



Start Trading Now

Sign up at IQ Option (Minimum deposit $10) Open an account at Pocket Option (Minimum deposit $5)

Join Our Community

Subscribe to our Telegram channel @strategybin to receive: ✓ Daily trading signals ✓ Exclusive strategy analysis ✓ Market trend alerts ✓ Educational materials for beginners

Баннер
Retrieved from "https://binaryoption.wiki/index.php?title=Financial_Services_Compensation_Scheme_(FSCS)&oldid=30439"