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Brief encounter

James Salmon follows the progress of Aifa’s Stakes in the Ground initiative to protect IFAs against retrospective regulatory action

Aifa’s Stakes in the Ground initiative has taken a step forward after the trade body issued an invitation to tender to research consultancy firms.

The brief is to help compile a recognised and independent source of documentary evidence of existing industry practices and prevailing economic conditions.

The aim of the project, which has been bandied around since Paul Smee was Aifa’s director general, is to address concerns from the IFA community that the FSA and Financial Ombudsman Service continue to apply current regulatory standards to actions taken against a different economic and regulatory backdrop.

Although the project remains barely a glint in Aifa’s eye, it has secured widespread backing in principle from industry trade bodies, which will presumably have to help fund the scheme, and from the FOS, which it is hoped will make use of the data. The Financial Services Practitioners’ Panel has also offered its support.

FOS spokeswoman Emma Parker stresses that its initial support of the scheme is in no way an acknowledgement that it is not doing its job properly. She says: “We would not accept the criticism that we judge yesterday’s cases through today’s conditions. We have a long history of looking at past conditions and we are confident we do it fair and reasonably. That said, anything that provides more contextual information is helpful and would provide us with another strand of information to use.”

It is clear that the Stakes in the Ground project could prove an invaluable PR tool for the FOS. Embracing this new source of evidence will help it silence some of its critics and reassure IFAs that it is not engaged in the dark art of retrospection.

Parker says the FOS spends a disproportionate amount of its time smoothing out relations with the IFA community and, therefore, anything that gives IFAs increased confidence in the service can only be a good thing.

Initial feedback from IFAs is positive. Wilson Dean Financial Services director Nick Lincoln believes the project will give IFAs more peace of mind if fully embraced by the FOS and FSA. He says: “All we as IFAs can do is be totally compliant in today’s framework . Charting current practice could be great for all concerned. It will make the FSA and the FOS’s jobs easier and give us more peace of mind.”

Halton Insurance Service director Mike Fry, while holding no deep-seated concerns about the fairness of the FOS, thinks the initiative is a great idea which could restore confidence in the regulatory powers. He says: “IFAs are living on a knife edge, thinking that that they could be punished for something they did 10 years ago. It is a great idea for the regulator to have another reference point it can use to make its judgments.”

Solicitor Clare Ward Smith, of Fishburn Solicitors, says the project could prove invaluable for the legal profession when defending IFAs against complaints. She says often the only way to assess historical conditions properly is to hire an expert or undertake in-depth research. A readily available source of information could therefore save a lot of time and money, in terms of deciding whether to bring claims and how to defend them.

With cases often hinging on documents provided by each party, Ward Smith says this new information source could help protect many IFAs who have not been as diligent in their record-keeping as they might have been.

She says “I think the legal profession will embrace anything that encourages greater consistency in FOS rulings and reduces the number of actions commenced retrospectively.”

Judging by the enthusias- tic reaction to the central concept underpinning the Stakes in the Ground project, it seems that it could be a winner. But nobody is under any illusion that this is any more than a concept and a bold one at that. Lincoln describes the prospect of translating this concept into reality as a “big ask”.

Aifa deputy director general Fay Goddard admits the project is ambitious but also warns IFAs not to view it as a “magic bullet” solution to retrospection.

She says: “It is very difficult for the FSA and FOS to make judgments today on past events, especially those that took place a long time ago.

“This not a panacea or cure but at the moment it has got to be better than nothing because there is no consensus.”

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