Tisa to work on restrictive covenants pact post-Towry case
The Tax Incentivised Savings Association will try to form an industry consensus on how restrictive covenants should apply in the financial services industry.
Towry is currently suing Raymond James and seven former Edward Jones advisers for £6m in damages over alleged client solicitation. Both Towry and Raymond James are Tisa members. The verdict is expected to be formally handed down on February 14.
The Tisa Distribution Advisory Council is expected to begin work after the case has concluded.
Tisa Distribution Advisory Council chair David Hazelton says: “We are trying to get some kind of consensus within the industry on restrictive covenants. We will be getting feedback from the industry to see if there is a way of avoiding further legal action bec-ause it seems that contracts are getting tighter and litigation will become more common.”
Hazelton says that keeping everybody satisfied could be difficult.
He says: “There are lots of vested interests here. There are the advisers who have the view that they are under covenants that are too strict and should be less onerous, while at the other end you have got consolidators who are buying businesses for lots of money and want to be able to keep the clients.”
Brunning Newman Hough-ton director David Brunning says: “This is the kind of move which is a good idea on the face of it but is unlikely to get off the ground. I think the regulator would view it as a negative move because it looks like you are restricting the market.”
Foot Anstey associate, financial services litigation Jonathan Kitchin says: “To get a consensus across the industry could be helpful in terms of keeping litigation to a minimum but trying to impose a one-size-fits-all solution would be impractical because of the wide range of adviser types.”