Frequently I read articles telling me how proud the authors are to be working in the financial services industry. About how we improve people’s lives and add wealth to UK plc, etc.
All very laudable I’m sure but, proud?
How can we really be proud to operate within an industry where the basic protection of the Limitation Act is denied us by politicians who frequently betray their ignorance of the industry and, like my own MP, avow that they will follow the party line regardless of any personal viewpoint?
How can we stand tall when we toil beneath a regulator that evinces perfect hindsight vision but displays such a striking lack of foresight when looking ahead?
Last week Lord Flight proposed Amendment 83a to the Financial Services bill. The amendment sought to put right the reprehensible removal of advisers’ access to a 15 year limitation on complaints. Lest it becomes forgotten, the FSA drafted the dispute resolution rules such that they gave no access to a longstop defence thereby leaving the FOS free to assume non-ending jurisdiction over all financial advice from 29 April 1988 onwards.
Parliament did not debate this departure from statute and nor did the FSA consult on it until years later. In recent years the FSA has also refused to provide sight of the legal opinion which they maintain supports their argument that it was Parliament’s intention. One can only guess at this ‘intention’ as the matter was never raised in debate or at Committee stage.
Lord Flight’s amendment sought to rectify this crime against the industry but, not unexpectedly, it was shot down by the uninformed opinions of a number of Lords.
Lord Phillips of Sudbury, formerly the ‘legal eagle’ on Jimmy Young’s Radio 2 show, offered the novel viewpoint that, “very often a person taking out a pension… is wholly dependent upon theadvice of the financial adviser.”
Lord Newby, Deputy Government Chief Whip, presented the dictum according to the FSA/Treasury/Government but in defending the lack of a longstop he failed to acknowledge the original basis of the Limitation Act.
The Limitation Act 1980 as amended by the Latent Damages Act 1986 provides certainty for both parties. It enables firms to plan ahead without the threat of the Ombudsman hanging over them for eternity and provides a line in the sand for both parties.
When debated by Parliament it was held that the rights of complainants and firms were appropriately balanced by a 15 year longstop. After 15 years memories fade and few can recall with certainty what was said and the use of a longstop removes an ever-increasing likelihood of erroneous adjudications.
The FSA states that it has “been unable to demonstrate that it would bring additional benefits to consumers and firms” and argues that its introduction would be a gain for the industry at the expense of the consumer.
This conveniently forgets that up till 2000 all firms enjoyed this protection until it was summarily removed – an instance where the consumer unduly benefitted at the expense of the industry.
Of course, a matter that is conveniently ignored by the FSA and anti-longstop campaigners is that the longstop is designed to forestall court actions where the onus of proof is on the plaintiff.
The FOS uses an elastic concept termed ‘balance of probabilities’ which provides a double-whammy. Not only can antiquated matters be hauled within their jurisdiction but their inquisitorial remit provides a far likelier win for the complainant than going to court.
Alan Lakey is partner at Highclere Financial Services