FSA creates long stop for redress schemes
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An effective 15-year long stop has been introduced by the FSA on advice that is investigated as part of a consumer redress scheme.
The FSA was given new powers earlier this year to create consumer redress schemes to deal with specific market failures.
In a guidance note on the new schemes, the FSA says: “The power is limited so that the only failures a scheme can address are those a court or tribunal would find to have been failures at the time the activities were carried on rather than a subjective assessment by the FSA of the reasonableness of a firm’s actions.”
Aifa says this means that advice reviewed through consumer redress schemes would have to be measured against legal standards rather than those of the FSA or the Financial Ombudsman Service and therefore the statute of limitations would apply, which gives all professionals a long stop. Advice that does not fall under a specific consumer redress scheme would not be subject to a long stop.
Aifa director of policy Andrew Strange says: “Because this is based on a court situation rather than the FOS powers through FSMA, there is a statute of limitations - there is a long stop. So anything over 15 years is out. I think this is the first time we have achieved some element of a long stop within financial services.”
It is up to the Treasury to decide to enact the new powers that have been granted to the FSA before the regulator can make a consumer redress scheme. The long stop would apply to advice under specific consumer redress schemes where there has been widespread or regular firm failures.
Highclere Financial Services partner Alan Lakey says: “To get back a long stop in any form would be marvellous. The long stop was never mentioned in the Financial Services and Markets Act, therefore it did not exist.”
The FSA looked at introducing a 15-year long stop for IFAs as part of the RDR but said that the industry could not come up with compelling evidence to support its introduction.
The joint Parliamentary committee on human rights launched an investigation into the lack of a 15-year long stop for IFAs in March 2009 but this was dropped last November.
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Readers' comments (15)
Evan Owen | 29 Jul 2010 9:33 am
"therefore it did not exist"
This is a popular misconception, as Simon Mansell often says "a lie told often enough becomes the truth", in this case the lie was told by Gordon Brown and slavishly followed by the regulators who appear to have no humanity whatsoever, just another box to tick.
As I have been told many times "when you get close they pull the rug out from under your feet". Look to the ECtHR.
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Derek Gair | 29 Jul 2010 9:56 am
I and many others (including Evan Owen and particularly those of us at the helm of Adviser Alliance) have fought for a longstop for many years so - A Long stop at last - The FSA (not Government) deciding when and if to follow the law of the land again !!
Whilst this is great news and long overdue I have to say that this smacks of the FSA just ticking boxes and deciding unilaterally to conform with the law - let us remember it is not for the FSA to decide when and if they follow law it is for the government and the courts.
Is this an admission of wrongdoing on the part of the FSA and indirectly their masters the Treasury at last ??
AND - lets not forget the damage its omission has done to the industry and particularly those that have been in it since the day dot.
This is both a good and a bad day for the industry - a stroke of an FSA pen and the longstop exists - not right really is it however welcome it may be.
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paolo standerwick | 29 Jul 2010 10:46 am
Another failure of the FOS/FSA is SI2326. Policies sold under previous regulatory Ombudsman are being ignored and we are being billed for this under FOS's own law. This is another area that needs to be sorted as retrospective regulations are not acceptable in any democracy.
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Peter Turner | 29 Jul 2010 12:22 pm
I agree with Evan - there is a flaw in Alan's logic.
If we follow it, then we might argue that the Financial Services and Markets Act does not impose a speed limit on advisers going to see their clients so they can drive as fast as they like.
The fact that an Act does not speak on a matter covered by other Acts does not mean that they are repealed by it.
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Anonymous | 29 Jul 2010 12:40 pm
Are they just trying to fiddle with the RDR to make it a little more palatable?
It does not detract from the fact that the FSA is pursuing a policy t to ADD “professionalism” to the channel of Retail Financial Services that garners the least complaints (see most recent Financial Ombudsman Services Annual Report 2008/09 page 86).
Now the FSA is close to the end and in it's final death throws they going to hand over the RDR as a poisoned chalice to sow the seeds of the end for the new regulator before it has even taken breath.
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Evan Owen | 29 Jul 2010 3:14 pm
"I think this is the first time we have achieved some element of a long stop within financial services.”
Having been through every hoop, loop and turn on this regulatory rollercoaster since 1985 I can only declare that this is indeed a strange thing to say because what Paolo mentioned above (SI2326) cemented what governed the previous regulator (PIA) and Ombudsman scheme (PIAOB), namely "THE LAW" and in particular the 15 year long stop. This has been argued tiem and again and a recent JR against the FOS highlighted what HM Treasury described as the ‘legitimate expectation’ of firms not to have to face retrospection.
If I am wrong could someone tell me?
Are you claiming a victory here with “we have achieved”? Many IFAs wonder what AIFA has been doing all these years, the ones on the Council who don’t worry about it are either unable to comprehend all this or they think they can offload all their liabilities on their ARs.
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Alan Lakey | 29 Jul 2010 3:57 pm
My comment was not correctly related in the above article. I stated, "The long stop was never mentioned in the Financial Services and Markets Act, therefore ACCORDING TO THE FSA it did not exist.”
Adviser Alliance and the iFADU have fought with tooth and nail for the return of a human right that was unilaterally removed without the permission or even knowledge of Parliament and whilst a welcome return it continues to leave an unsavoury taste regarding the complete failure of the FSA to give succour to the laws that apply to all UK citizens.
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paolo standerwick | 29 Jul 2010 4:42 pm
By the way both myself and Derek Gair went to see Chris Cummings 4 years ago on this specific subject and he assured us he would look into it. Nothing ever happened until the momentum took place elswhere. It's not fair that AIFA get any credit for this as no investigation was brought to task at the time on the subject, remember Derek?
Also I should like to remind everyone of the Davis Kenmir/Evan Owen/Anderw Kerr meeting wish happened and was recorded in 2008. All fell on deaf ears at the time.
Claiming other organsation and peoples victories ring hollow to many. Hence AIFA haven't got the following they should have!
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Mike Fenwick | 29 Jul 2010 10:17 pm
Quote: "The FSA was given new powers earlier this year to create consumer redress schemes to deal with specific market failures."
So where would you expect what are called "market failures" to arise?
As I understand it, the new powers were introduced to address problems at the FOS when they were faced with high numbers of complaints.
Maybe that leads you to think about where the largest numbers of complaints have been recorded as occurring?
And that in turn might lead you to think about who would therefore stand to accrue the most benefit from the use of a long stop.
Shakespeare summarised it thus:
Polonius: Though this be madness, yet there is method in't.
Hamlet Act 2, scene 2.
Who might benefit most? I suspect you don't think that it will be the small IFA firm who will benefit most - true?
However as other posters have made clear we now have a clear and marked line in the sand over whether the FSA do or do not recognise the Statute of Limitations - what are the implications, if any?
Well, for me, there is one clear and immediate implication and it involves the OFT. The OFT have a continuing duty to observe and adjudicate upon the decisions and actions of the FSA for anything which may prove to be anti-competitive.
If, as I am suggesting, it can be put forward that some sectors of the market are being granted a benefit, which will not apply to other sectors of the market, then prima facie that is anti-competitive.
So, rather than welcome this move as some seem to have done, for me it should be the cause of a complaint to the OFT - not least because ironically what the powers as currently construed by the FSA will produce is - a "specific market failure".
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lol | 30 Jul 2010 2:32 pm
Why do we need the law when we have the fsa?
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