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Chris Hannant: The long-stop debate starts now

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We have had a couple of false dawns with regards to the FCA’s review of the need for a long-stop but later this month Apfa members will finally be meeting the regulator to start the conversation.

Apfa submitted its case for a long-stop in writing last week. The arguments about the impact of unlimited liability are evident in the PI market, the structure of firms and the way that investment, if it is made, mitigates the liability. As a consequence, it has an impact on the service to consumers.    

I noted with interest the FCA’s recent announcement on PPI complaints. It raises the question as to whether the current approach is “continuing to meet its objectives of securing appropriate protection for consumers and enhancing the integrity of the UK’s financial system”. One of the possible solutions it suggests could be a time limit on complaints.

The logic of this suggests the FCA recognises the value of being able to draw a line under an issue in providing certainty for businesses. It is not an issue of consumer compensation or none. It is about giving adequate and fair opportunity for a consumer to seek redress but then balancing that with a limit. We saw the same with mortgage endowments. By putting a limit in place, a firm is able to plan better and invest for the future.

I hope this is recognition of the need for balance between consumer protection and ensuring a viable and sustainable industry to provide a service for them. When a business faces potentially unquantifiable liabilities, it is crippling for future planning. Giving advice exposes firms to significant risk because of the inherent risk of investing. Given enough time (and neglect) any investment has the potential to sour. It is time for the effect the lack of a long-stop has on the advice profession to be recognised too. The debate with the FCA starts now. 

Chris Hannant is director general at Apfa 

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Comments

There are 9 comments at the moment, we would love to hear your opinion too.

  1. The Long Stop and The Statute of Limitations has been stolen from us!

    The FCA is a member of the executive. The separation of powers is designed to distribute authority away from the executive branch— in an attempt to preserve individual liberty in response to tyrannical leadership throughout history. The FCA is an unelected, unaccountable branch of the executive with quasi judicial and legislative powers. In short it is unconstitutional and it does not have the right to take away statutory and legal rights.

    Recently there has been much talk about the Magna Carta. In January 1215, the barons insisted that, as a condition of their support, King John execute a charter that recognised their liberties as a safeguard against further arbitrary behaviour on the part of the King. This was the Magna Carta.

    Here I will let the articles speak for themselves using their original chapter numbers:

    20. For a trivial offence, a free man shall be fined only in proportion to the degree of his offence, and for a serious offence correspondingly, but not so heavily as to deprive him of his livelihood.

    38. In future no official shall place a man on trial upon his own unsupported statement, without producing credible witness to the truth of it.

    39. No free man shall be seized or imprisoned, or stripped of his rights or possessions, or outlawed or exiled, or deprived of his standing in any other way, nor will we proceed with force against him, or send other to do so, except by the lawful judgement of his equals or by the law of the land.

    40. To no one will we sell, to no one deny or delay right or justice.

    45. We will appoint as justices, constable, sheriffs, or other officials, only men that know the law of the realm and are minded to keep it well.

    Compare and contrast FSMA 2000, The FSA & FOS!

    When King Charles 1 was placed on trial for waging war on his own people in 1649, he sat on the steps of Westminster Hall and conducted his own defence: By what right do you accuse your King, for the King is above the law and his right to rule was God given.

    The court condemned him to death on 30th January 1649 and it was declared that no man, woman or institution is above the law (and that must be applied to the FCA)!

    Yet the unelected FCA is not accountable to the elected Treasury Ministers or to an elected Parliament. This was confirmed by Hector Sants at a Treasury Select Committee meeting on 9 March 2011 where Sants told TSC Chair, Andrew Tyrie MP, that if the TSC didn’t like it then Parliament needed to legislate to remove the FSA’s non-accountable status!

    Regards

    SIMON MANSELL
    TEMPLE BAR IFA LTD

  2. There is no reason why our industry should bear this burden when no other industry does- so I hope the Regulator looks on this favourably this time. we can then spend the time and resource on getting consumers better educated in the first place so they have a chance of understanding what they have taken on and pay as much attention to what they buy as they do when they buy a house or a car.

  3. As Jane and Simon’s comments highlight, the current situation is outrageously unfair by historical as well as current standards. And by unfair, I mean not just to the many advisers who run small businesses (the oft-mentioned life blood of the economy) doing their best to secure the financial well-being of their clients, despite all the odds stacked against them. I mean unfair also to the vast numbers of the population needing that advice who are now paying a high premium in charges for the burdens of regulation gone over-board and the growing numbers disenfranchised altogether from accessing that advice by the dual effects of reduced routes to advice and charging changes to unpalatable to swallow.

    All power to Apfa, and the likes of Alan Lakey and Phil Castle giving their energies to getting this appalling situation rectified. (And no I’m not an adviser, nor wish to be under the current circumstances. But I am a campaigner for consumer rights and financial services being rigged better towards what people actually want and need.))

  4. The powers vested in the FCA and its Ombudsman in regard to the complaints process outrageous and surly must be brought to task.

    We know to our own cost that following a decision and after the “appeal period is exhausted” (a period of 3 month I believe), there is no right to appeal any decision, or more importantly the recovery of costs or redress – regardless of later discovery.

    In short, a complainant putting forward a claim, be it vexatious or constructed for the purpose of financial gain, is home free and can bank their ill-gotten gains without fear of any civil recovery action after just 3 months.
    In our case, we became aware of a document written by the complainant, (in his own hand), that evidenced and supported our defence arguments. More importantly, it clearly an unambiguously evidenced the complainant was lying and purposely concealing information that was detrimental to his claim. Despite us providing the document to the Ombudsman and him acknowledging his decision would most likely be altered had had he been aware of this letter , we were told simply – “you are out of time”.

    In every other part of business in the UK, “time” starts when the knowledge or evidence becomes available and more importantly there is always an opportunity to seek to overturn a decision.

    Why is it not the case, that when making a claim for redress a complainant is not required to make a legally binding declaration as to the truthfulness of his claim and be required to make a full document disclosure. On the understanding that if at a later time it is evidenced they have lied, there is a course of recovery open. The truthful claimants have nothing to fear, but those seeking gain at the cost of others would be at risk.

    Also, the ability to choose what to disclose only helps the perpetrators of such claims. Long stop time barring is welcomed, but fundamental changes to other “time issues” also need to be addressed!

    Yours etc.
    A surviving victim of a constructed claim.

  5. Groundhog Day ?

  6. I understand that the report by APFA to the FCA will be made public today. Can I suggest that MM publish it in full so that advisers can comment upon it on the Blogs which may enable the FCA to read about the strength of feeling on the issue by those for and against re-instatement. I have never seen any argument in writing for the original removal of the longstop when the rulebook changed from PIA to FSA and finally to FCA. Nor have I seen any discussion over its extension to those offering consumer credit who were not previously subject to the FOS and hence still had their right to claim a longstop. Nor have I seen a cogent argument for FOS having an infinite opportunity to open and re-open cases (I know of an adviser who left under the PIA and 25 years later and after 2 pension reviews is now being hassled by the FOS when they have NO legal jurisdiction over the adviser as they wrote the business when the longstop was part of the rulebook AND left before it was removed, which is retrospective).
    @David Thompson – Whilst I know it is morally abhorrent and actually people are being allowed to actually breach 1 of 10 rules which have been in existence for more than 2000 yrs with impunity (i.e. though shalt not bear false witnesss) we need to take one step at a time.

  7. We are sleepwalking into an elected dictatorship. The FCA has been granted powers outside of parliament because its suits government to bypass the tedium of accountability. It is not the only example.

    In contemporary usage, dictatorship refers to an autocratic form of absolute rule by leadership unrestricted by law, constitutions, or other social and political factors within the state. It suits whatever government to allow regulation by dictatorship i.e. unrestricted by law, constitutions, or other social and political factors within the state.

    I suspect that we have all been duped over many years into the false belief that we lived in a democracy subjected to the rule of law, where no man/woman or body is above the law. The FCA is an unelected, unaccountable body of the executive. In constitutional law the executive is the part of government but separate with responsibility for the administration of the state, in our case the regulation of the state and its financial services.

    The government claims the FCA is independent because they have an eye to preserving the myth of the “separation of powers”, a constitutional issue because if the government and executive are one and the same you risk dictatorships where the different powers of government are assumed by one body i.e. no separation of powers. Why has the judicial system not challenged this – perhaps because they are not longer robust enough. The FCA and the government must be the same because the FCA is not answerable to government and the only way that could be tolerated is by virtue of the fact that the FCA is actually the government speaking. That must be the only explanation to the FCA’s lack of accountability and its pursuit of advisers outside of the statute of limitations and longstop.

    The role of the executive is to enforce the law as written by the legislature and for its actions to be adjudicated upon by the judicial system i.e. the courts and not a FOS quango. We all know this is not the case in financial services. The FCA is therefore an abuse of power in a democratic system and as such a danger to us all.

  8. @Simon M – I wasn’t present at APFAs last meeting with the FCA on the subject of the longstop, but Alan Lakey was and one of the FCAls attendees was Sam Condry who for some reason looked up my profile on Linked in so I phoned him directly having seen he had done so. He has not explained why he looked me up.

    His own profile on Linked in makes interesting reading http://uk.linkedin.com/pub/samuel-condry/4/7a0/17/en

    it includes;

    Senior Policy Officer
    The Bar Standards Board
    March 2010 – January 2014 (3 years 11 months)
    • Developing policy and designing regulatory frameworks
    • Drafting and publishing consultations, reports, articles, policy papers, presentations, briefings and recommendations etc.
    • Project design and management
    • Responding to legislative and policy changes
    • Providing technical advice and training (internal/external)
    • Alternative business structures, new permissions, standards, professional practice
    • Access to justice and legal services

    and it would be interesting to hear a public response from him to Simon Mansell’s assertions above.

  9. Many thanks Phil for your comments. I will ask for his comment via LinkedIn and direct his to this blog.

    My guess is he is worker bee supporting the Queen (FCA), with not authority other than to reinforce his hive, the status quo.

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