The Wealth Management Association has criticised the amount of money its members will have to pay towards the Financial Services Compensation Scheme's levy.
The organisation said it was unfair that UK investment firms would face paying more than £47 million to deal with the failure of a firm which never paid a penny into the scheme.
More than one-third of the £112 million contribution from investment firms (£47 million) will be spent in compensation to consumers affected by the failure of Catalyst Investment Group – including investors outside the UK.

{desktop}{/desktop}{mobile}{/mobile}

WMA director of regulation Ian Cornwall said: "The claims arising from Catalyst are due to the fact they promoted unregulated products: the promotional material they produced is reported to be unclear, unfair and misleading.
"So consequently consumers have a claim against Catalyst. In fact even consumers in Malta can claim off the UK compensation scheme in relation to the activities of Catalyst."
The WMA believes this contradicts the Financial Conduct Authority's design principles for the FSCS, which include durability, resilience, fairness and affordability. The WMA called on the FCA to reconsider the "overall fairness of the Scheme's funding model to ensure firms undertaking promotional activities have to contribute their fair share".
Mr Cornwall said: "The FCA fails to take into account that firms undertaking promotional activity make no contribution to the FSCS pot.
"So we're now in a position this year that a substantial chunk of the compensation claims against the investment intermediation class will be against Catalyst, which will not have paid one penny into the compensation scheme, and the FCA were aware of this defect in the funding model at the time they approved the rules."

WMA chief executive Dr Tim May said: "We absolutely agree with the principle that the investment community funds a compensation scheme to protect investors from industry failures.
"But in order to maintain the support of that community, it has to be fair.
"It is time that product providers and promoters take on their share of this funding burden. We now call on the FCA to investigate this problem urgently."  

The FSCS was asked to respond to the criticism and it provided this statement: "Since 1 April 2014, we moved to our 36 funding model.
"The model proposed by FSCS may help to reduce the volatility of annual levies and the likelihood of interim levies, while also giving the industry greater certainty.
"This approach is based largely on past claims experience, which we adjust to reflect current claims trends and market intelligence when the levy is set."

The FCA has been asked to comment and any responses will be added here later.