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Financial advisers may be able to time-bar client complaints by altering their terms of business (ToB) contracts in a dramatic development in the ongoing long-stop saga.
The FSA says it will look at cases on an individual basis after it emerged one IFA is seeking legal advice over whether he can change his key facts, client agreement and ToB documents to include a complaints deadline.
Phil Castle, managing director of Kent-based IFA Financial Escape, says he wants to introduce a "contractual" 15-year long-stop which kicks-in the moment a client leaves the firm.
The FSA says it will wait to hear the recommendations of Castle's solicitor, but adds: "If a firm wants to introduce a long-stop, that would be reviewed on an individual basis. We would have to look at the details."
Castle says: "We want to introduce a contractual long-stop that will roll forward all the while the client remains with us.
"From the day they cease to be a client, they have 15 years. We are seeking legal advice on this but whether the FSA deems it TCF or not is another matter.
"As far as I'm concerned, no long-stop means infinite liability. It must exist, whether it's 50 or 100 years, it simply must."
Castle's plans come after it emerged the FSA refused to consult on re-introducing the rule, afforded to other professions via the statute of limitations, in 2003 when under the leadership of John Tiner.
Minutes of a Board meeting, obtained under the Freedom of Information Act, show the regulator did not consult on the issue "because we considered it would be detrimental to consumers".
In a presentation delivered by Tiner, he said his team had considered three options: to make no change to the current rules; to introduce a new rule limiting the cases the FOS can consider after 15 years; or to introduce a new rule imposing a 15 year long-stop for all complaints made to firms or the FOS, with effect from six months after the rule is made.
Although the report sets out each proposal in detail, it makes it clear that making no change to the rules is its "preferred option".
It says the FOS "very rarely" exercises its discretion to look at cases beyond the existing three and six-year time limits, adding keeping the rule as it is would also involve no change to the Handbook text.
Anger over the absence of a long-stop for financial advisers appeared to settle in June this year when Dan Waters, then director of retail policy, declared the FSA would "not move" from its current position.
The FOS says about 2,000 of the cases it receives each year - less than 1.5% of its current workload - would be time-barred by a long-stop.
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What a Great Idea......
Well done Phil. I look forward to hearing about your progress. The FSA lost my respect many moons ago and is is heartening to see IFAs standing up and challenging the Beast.
Posted by: David Chubb
In the wife's name.
This really is a storm in a tea cup. Only about 2% of complaints come from IFAs. FOS says it would only be 1.5% of their workload if there was a long stop. So that equates (pro rata) to 0.03%. Whichever way you wish to calculate it’s pretty small beer. True not if an IFA gets hit, but there is the availability of run off. I have checked with my PII insurer and they see no problem in obtaining it. Anyway to Phil and anyone else who is paranoid on the topic – if it really worries you what’s wrong with retiring to Brazil or Panama? Alternately you should progressively ensure everything (bar the minimum compulsory solvency) is in the wife’s name – and she has nothing to do with the business. Come on guys – think clearly.
Posted by: Harry Katz
Ashamed
Harry, the Longstop is/was a law. There was no discussion about it's removal and as shown above little discussion about why it should not be reinstated and NO EVIDENCE has been brought to bear as to why it should have been removed in the first place nor why itr should not be respected by FOS. It is crass to suggest I should have to leave the country of my birth just to get my rights re-instated. Like my greatgrandfather (Gassed in WW1 and my grandfather who fought with GHQ Liason Regiment/PHANTOM)I'll fight for my freedoms and I mean it literally. For once I am ashamed of your comments Harry. One person persecuted AFTER the expiry of a longstop, even if it is 0.03% is one person too many. You know as well as I do that it is not always possible for a retiring adviser to get PI rundown. I used common sense and established my business as a Ltd Company from day one, but there are plenty of sole trader and partnership firms out there who may not even know their spouse may find their home is up for grabs due to an FOS ajudication for which the only appeal is a Judicial Review. If it is such a storm in a Teacup, why will the FSA not re-instate it and why do lawyers and accountants, including Cherie Blair and Walter Merricks along with Mark Hoban waive their own rights to a longstop? Is this AIFA's official line on the longstop Harry or just your opinion? If the former, then I'll resign tommorrow which is quite ironic bearing in mind it was you who persuaded me I should join AIFA a year ago. If it is just your opinion, perhaps you can think of another minority where one could say, it's OK to have different laws for them, it's only 0.03% of the population, it doesn't matter if we remove their rights................ this is the slippery slope and it's been seen before and I'm sure it will be seen again.
Posted by: Phil Castle
Harry's View or AIFA's?
Harry, this is far from a storm in a teacup - more like a hurricane on a banqueting table. This is not just about the reality of advisers being devastated by stale claims - which may not be readily defendable due to time constraints and lack of files - but also the reality that there is a major principle at stake. Maybe the FSA has dropped principles based regulation (some would say they never started) but I want to operate my business in a balanced environment where my clients and myself have access to and succour from the rule of law. Harry, is this your personal view or does it reflect the AIFA line? I know that other members of the AIFA Council fee differently.
Posted by: Alan Lakey
Mr
Sirs, I have read both sides of these articles with interest and as a "man in the street" whom, one day, may need the services of an IFA. I would say that from a customer perspective never ending liability seems really good, it is a shame it does not apply to employment law etc. Then of course it couldn't - If it did I for one would be penning another type of letter. However in reality, how can we have one rule for one and one rule for another? To Phil Castle, in my opinion, you are right to stand your ground to the others taking an opposing view - well that is democracy fought for by many who sacrificed much for us. Freedom, fairness and democracy was what world war 1 and 2 were all about - such values seem to be lost here for I can see no freedom, no fairness or FSA democracy in an IFA's perpetual liability.
Posted by: R Anderson
Agree - but Side Issue
An explicit long-stop in contracts might make for an interesting judicial review case - but you need to remember that what would stand up as a defence in court does not bind the Ombudsman. The case-law suggests he can ignore an otherwise legally waterteight defence if HE alone decided it was "fair and reasonable" to do so, and did not fall into that wednesbury unreasonableness test. And of course, experience suggests that FOS will indeed ignore the law if it suits them... The bigger picture problem is the entirely arbitrary nature of the FOS jurisdiction – the so-called “fair and reasonable” basis. We need FOS to become an alternative process to litigation for an action under s.150 (i.e. has a rule been broken, has somebody lost *as a result* and, yes, is it in time?). Both parties in the process need to have equal rights - certainly if the IFA firm itself would otherwise qualify as ‘eligible complainants’. The long-stop is probably a side issue.
Posted by: Man in Black
Sudetenland
...is an example of one man's storm in a tea-cup being another's thin end of the wedge. I am just sorry that an IFA is spending his own money to defend rights that are the job of AIFA to protect. I firmly believe that Phil is correct to defend what are basic human rights. How can it be reasonable to have no statute of limitations. Giving advice is not a crime, nor even a potential crime if properly documented. If the level of potential complaint is so low, then a fifteen-year long-stop is not exactly risking the collapse of the economy. There are others who can manage that without help! I will not comment on the views of Harry Katz as I upset him last time I did so and it is not in my nature to do that, but I think he needs to re-examine his approach to the world.
Posted by: Stuart Duncan
No one is above the law
The long-stop argument with the FSA only affects sales made after 1st December 2001. Prior to that all sales were subject to the Limitation Act 1980 if relief was claimed by the firm in their executive response to the claimant. The trouble is that the FOS do not follow the law (SI2326) when determine a claim for compensation. It would be interesting to test if a FSA rule takes presidence over common law made by Parliament.
Posted by: Per Oszadlik
Long stop
This is manifestly unfair treatment of IFAs and Insurance Brokers. Other professions have it, why can't we? It's too easy for carpetbaggers to pile on spurious claims once they know an advisor is long retired, possibly in ill health, or even claim against his Estate after he's died. I had a spurious low cost endowment claim against me thrown out on first call and twice more on appeals. Had I not had a full file and my wits about me the claim would probably have stuck. The claimant relied on the fact that the advice was so long ago I couldn't possibly still have the file. He got that wrong, but I wonder what the position would have been had he waited till I'd retired...
Posted by: J Smith
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Long-Stop discussion
So, the FSA refuses to budge on the possible introduction of a long-stop rule. Hopefully, the FSA will be budged once we get rid of this stinking government and the FSA is disbanded. Perhaps the taxpayer should be able to hold senior members of the FSA personally responsible for the mess they allowed to happen (and were party to) and the massive burden that it they helped to place on every UK taxpayer due to its incompetence. Only if these incompetent morons are taken to task and have their pensions and life savings ripped away would they begin to understand the massive unfairness in the current unending potential liability advisers have to accept.
Posted by: Bill Wells