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10-year battle saw FSCS ‘bullying’ and FOS ‘solicit complaints’

A former IFA plans to sue the FSA for harassment after a long saga involving the regulator, the Financial Ombudsman Service and the Financial Services Compensation Scheme, claiming that complaints had been solicited from his clients and he was subjected to bullying. Nicole Blackmore reports

John Calland says the FSA, FOS and FSCS worked together to solicit claims against him from clients who had not complained to him about the advice he gave
John Calland says the FSA, FOS and FSCS worked together to solicit claims against him from clients who had not complained to him about the advice he gave

Retired IFA John Calland is suing the FSA for harassment, after a 10-year battle with the regulator, the Financial Services Compensation Scheme and the Financial Ombudsman Service.

Calland says all three bodies shared files and collaborated to progress loss assessments against him and force him to compensate former pension clients, who had never complained to him about the advice he gave.

Independent complaint assessors for the bodies have found that the FOS solicited complaints from former clients against Calland and the FSCS’s prolonged pursuit of details of his financial assets and liabilities, which included threats of imprisonment, amounted to “bullying”.

Calland says: “I have suffered continual harassment from the regulatory agencies about pension questionnaires which were solicited five years after my retirement, and despite the fact that no pension client has ever complained to me.”

Calland retired as principal of Calland Insurance and Mortgage Services in December 1997 after selling the firm to his son, John Calland Jnr.

In May 1998, the Personal Investment Authority, which preceded the FSA, wrote to Calland Jnr acknowledging that the firm had completed its pension review when Calland Snr was the proprietor.

Then on November 9, 1998 the PIA wrote in error to all 287 CIMS pension clients stating that the firm was no longer authorised to advise on pensions. It asked clients to complete an enclosed questionnaire to see whether they had been “badly advised”.

On November 10, the PIA sent a retraction letter to the clients and a letter of apology to Calland Jnr, but Calland says this mailing undermined his son and damaged the firm’s reputation.

In the same month, the PIA wrote to Calland Jnr, asking if he had taken over all regulatory responsibility and liability for any redress payments for both phases of the pension review and in January 1999 Calland Jnr confirmed this.

In January 1999, the PIA wrote to Calland Jnr, saying that, as a result of his confirmation, the PIA did not intend to undertake any action in respect of either CIMS’s phase one or phase two of the pension review but that the firm would be subject to the normal monitoring requirements.

In March 2000, Calland Jnr was declared bankrupt and CIMS ceased trading, without Calland Jnr formally completing phase two of the pension review. However, before his retirement, Calland completed a review all his firm’s pension business, which covered phases one and two of the review.

In April 2001, the Investors’ Compensation Scheme, which preceded the FSCS, wrote to Calland saying it had received a claim for compensation from a former client. It said a preliminary loss assessment had identified a potential loss of £6,742, but that it had not investigated the circumstances surrounding the advice given.

It asked Calland to complete a voluntary statement of assets and liabilities, in order for it to decide whether he would be unable to meet claims against him and if the firm should be declared in default. Calland did not complete the statement.

In July 2001, the PIA decided that Calland remained liable for the complaint because he had not provided the information requested, so the client must complain directly to Calland.

Calland says the former client did not contact him but in July 2002, the FSA wrote to Calland saying it was investigating CIMS’ “apparent failure to comply with its pension review obligations” and requested he voluntarily provide a statement of personal and business assets and liabilities.

When he again did not respond, Calland says the FSA and the FSCS colluded to find a way of forcing him to comply with their requests.

An internal FSA report from August 2002, obtained by Calland through a Freedom of Information request, states: “As Mr Calland is no longer a member (he left membership in 1998), he is under no obligation to co-operate in any way. Nor is he subject to any form of FSA disciplinary action.”

But in an email from the FSA’s enforcement division to the FSCS in October 2002, also obtained through an FOI, the FSA says: “Last time we spoke, the FSCS was not getting any cooperation from Mr Calland Snr with regard to his financial details. I have been thinking about how the FSA could ensure Mr Calland Snr’s cooperation, but unfortunately have come up against a few issues.

“You are probably aware that the FSA has various powers to ’force’ compliance with compulsory requests for information. However, our legal team over here is of the opinion that the FSA could not use compulsory powers to require the information from Calland Snr as part of our current investigation.

“Further, the circumstances surrounding Calland Snr do not justify an investigation into his resources (as Calland Snr has not actually done anything ’wrong’).

“The FSCS has powers under FSMA by which it can require information from ’relevant persons’ and enforce the requirements through the courts (by contempt proceedings). This is dependent, however, upon a claim being made against that person. We were unsure whether the referral of a loss from the FSA’s Pensions Unit to FSCS would be considered to be a ’claim against that person’.

“What we are really after is some idea from the FSCS concerning their views on exercising their own powers in this situation.”

At this point, Calland says the FSA attempted to stir up complaints against CIMS.

In December 2002 and again in February and April 2003, the FSA wrote to all 287 former CIMS pension clients informing them they might be eligible for compensation and asking them to complete a questionnaire.

In April 2003, the FSCS wrote again to Calland seeking information about his finances and threatened Calland with legal proceedings if he did not comply.

In May 2003, Calland received a letter from the FSCS saying it had received details from the FSA of preliminary loss assessment claims from five former clients and again requested financial information and reiterated its threat of legal action.

This was followed by a letter from the FSCS’s lawyers Denton Wilde Sapte in August 2003, which threatened him with a fine or possible imprisonment if he did not comply.

Calland continued to argue that loss assessments were not claims and did not provide personal details of his finances but claims he offered to assist in the FSCS’s investigations.

In November 2003, Calland and his wife feared that their assets would be unfairly seized and they relocated to Spain. However, Calland says he ensured that he remained in communication with the regulatory authorities.

In March, August and October of 2004, Calland received further demands for his financial details from the FSCS. In October, he received a letter from the FSCS which said the total value of the loss assessments received from the FSA to date was £157,033.

When Calland refused outright to reveal his finances the FSCS informed him that it had advised all CIMS pension clients with loss assessments to contact either Calland directly or the Financial Ombudsman Service. At that point, the FSCS withdrew from correspondence with Calland.

Calland maintains that none of his former pension clients contacted him with a complaint, despite being advised to do so by the FSCS.

Then in March 2005, the FSA again wrote to Calland but this time, instead of potential loss assessments, the FSA now referred to compensation “due”, without any apparent investigation of the advice given by CIMS.

The FSA letter says “of the cases reviewed to date, there is redress due to investors amounting to £168,819 with a further six cases awaiting assessment”.

The letter said Calland must complete a personal statement of assets and liabilities and to maintain regular contact with the FSA “until your firm’s pension review has been completed”.

This was almost eight years after Calland retired and his client files were sold by the receiver following the bankruptcy of his son.

Calland did not supply his financial details and so in April 2005, the FSA emailed Calland stating that as he had not cooperated with the FSA’s requests it would refer the claims to the FOS.

In June 2005, the FSA wrote to a number of former CIMS pension clients stating that Calland had refused to pay the redress he “owed” them. The FSA said it had referred their claims to the FOS, which would invite them to make a complaint. These were the same investors who had not acted upon the FSCS’s advice to contact the FOS eight months previously.

In July 2005, the FOS wrote to the clients confirming that the FSA had passed files concerning their loss assessments to the ombudsman. It sent partly completed complaint forms, with details of the complaint, to the CIMS clients to sign. It also asked if the client had reached an amicable solution with CIMS, stating it can only become involved in a complaint if the firm has sent a final response to the client.

Calland says the FOS had no right to look into the cases as none of the investors has ever complained to him, even though the FOS supplied them with his address.

Five clients returned the form in 2005 and one in 2007. Two complainants later withdrew their complaints, leaving four cases with the FOS.

In September 2005, Calland emailed the FOS asking if it was the ombudsman or the FSA that pre-entered the information on the forms. The FOS confirmed via email that it entered the “basic details of the case” from the case files referred by the FSA. It said complainants were invited on the form to go into further details about their complaints and added: “This is standard practice at this office.”

In November 2005, Calland complained to the FSA, the FSCS and the FOS about their handling of the situation.

Calland also complained to the Complaints Commissioner for the FSA, Anthony Holland. Holland referred Calland back to the FSA’s complaints department twice before deciding not to investigate Calland ’s complaint in April 2008, saying there was “insufficient gain to be made by making a full investigation into the matter”.

In late 2005, Calland complained to the FSCS Independent Investigator, Richard Irwin, about the FSCS’s two-year pursuit of details of his financial assets and liabilities.

In June 2006, Irwin found the FSCS had subjected Calland to “bullying”. He said the FSCS should have stopped pursuing Calland until it was satisfied there were some valid claims.

He said: “If the validity of claims had been established, then its dogmatic pursuit of Mr Calland would have been fully justified. Without that step, I do consider the approach of FSCS to have been bullying.”

In May 2006, Calland complained to the FOS Independent Assessor about the way in which the ombudsman had solicited signed complaint forms from former CIMS investors.

In December 2006, the Independent Assessor Michael Barnes concluded that the four pension complaints had been solicited.

He said: “The conclusion I come to from my review of the four files is that normal procedures appear to have been truncated as a matter of expediency, and the complaints were, in effect, ’solicited’. I consider that the basis on which the FOS has progressed the four cases to date is unsatisfactory and has caused you distress.”

Barnes stated that his main concern about the files was that there were no investor complaints to the firm on file, and the FOS appeared to have bypassed its usual procedures for processing claims, saying that “if the FSA ’wills the end’, the means adopted by the FOS to achieve that end should follow normal procedures”.

He said: “In my view, the immediate priority is for the FOS to get its investigation on to a proper basis in relation to its normal procedures. I am therefore recommending that the FOS service review manager should review the extent to which the four complaints in question have been properly made, and let you know what action he now considers is necessary.”

In February 2007, the FOS wrote to Calland saying it accepted Barnes’ recommendation. However it has since continued pursuing the four solicited cases.

Since then, the ombudsman has dismissed one case in August 2010, issued a final decision against Calland in September 2010 in another, and issued provisional decisions against Calland on the remaining two. Calland is arguing for oral hearings on both.

Calland says he does not accept that the FOS should be arbitrating the cases in light of the fact that the FSA and the FOS collaborated to solicit them and he is suing the FSA under the Harassment Act.

Calland is being represented by Hugh Tomlinson, QC. The FSA has submitted a one-off application for a strike-out, which will be heard at Exeter county court on September 26.

Calland says: “I want the FSA and its agents to be held accountable for 10 years of harassment but more than anything I want revealed what incredible and intractable prejudice I have come up against from the regulatory agencies.”

The FSA and FSCS declined to comment.

An FOS spokeswoman says: “If either a business or a consumer is unhappy with the ombudsman service they can ultimately complain to the Independent Assessor. This issue was looked at back in 2006 by the Independent Assessor.”

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Comments

There are 6 comments at the moment, we would love to hear your opinion too.

  1. Richard Jenkinson 11th August 2011 at 10:11 am

    ……. ” they can ultimately complain to the Independent Assessor “.

    The result being that they would do nothing against the FOS anyway.

  2. Par for the course.

  3. Orwellian ! But it tells you all you need to know about the out-of-control monster that is Financial Services Regulation.

  4. Worse than Orwellian
    Completely Kafkaesque
    This organisation hides behind the shield of treating customers fairly to harass and bully IFAs’

  5. Middle Engaln under attack by Stasi 11th August 2011 at 4:31 pm

    Attack police, smash shop windows and steal property then burn the shop down and you’d get less than this poor soul got form the Stasi FSA. Regulated firms have been outlawed and abused by this unelected unaccountable judge jury and executioner!

  6. For a long time now the regulator appears to have an agenda of stirring up trouble where none existed before, an agenda that the FSA seems more than ever determined to pursue, despite a catalogue of failures to get to grips with problems that really have needed tackling. Arch Cru, MPPI mis-selling, Equitable Life are examples that spring readily to mind.

    Yet instead of concentrating on doing a better job of addressing these types of problems, the FSA has chosen to widen its remit into all sorts of new areas, perhaps in the hope of giving the impression that by trying to tackle absolutely everything, whether it’s a priority or not, it’s actually doing a better job. The results are plain for all to see ~ chaos and confusion, whilst the costs of regulation continue to go up and up. What a mess.

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