FSA says long-stop clauses are not allowed
The FSA has issued a warning to small IFA firms against inserting a long-stop clause into their terms of business.
In an update for smaller firms, the regulator says it will take action against those IFAs who include a long-stop caveat into their terms of business.
The FSA says such a clause is likely to be contrary to Cobs rules, may fail to meet outcome six of its TCF initiative and may be contrary to the unfair terms in Consumer Contracts Regulations 1999. The FSA also says that those who insert a long-stop clause would not be binding on the Financial Ombudsman Service.
The update says: “It has now come to our attention that some firms may consider inserting a long-stop clause in their terms of business. One of the key functions of our regulatory regime is to protect consumers. A long-stop clause may be inconsistent with that regime if it seeks to exclude or restrict any liability a firm may have to a consumer.”
Previously, the FSA concluded that it will not introduce a long-stop because it has been unable to demonstrate that it would bring additional benefits to both consumers and firms.
The newsletter continued: “ We recognised that many in the industry would be disappointed by this decision.”
However, the update said: “We would not consider acceptable any approach by a firm which purported to exclude or restrict a customer’s right to pursue a complaint against a firm with the FOS or before the courts. Accordingly, we would expect to take follow-up action with any firm adopting this course.”