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CPD: Financial services regulation and ethics

The latest edition of Newsbrief counts as 1 hour of structured CPD and covers the regulatory and marketplace changes which took place during March 2014. Visit the Money Marketing CPD Centre to answer 10 multiple choice questions and complete this CPD activity. Just click into your CPD Plan and you’ll find each month’s marketplace changes round-up in your activity list.

April CPD Newsbrief – Financial services regulation and ethics


No second bite of the cherry for FOS claimants

Charlotte Mannouris

In a welcome piece of news for the financial services industry, the Court of Appeal recently ruled that complainants who have accepted the determination of the Financial Ombudsman Service (FOS) cannot then pursue their advisers through the courts for an additional pay out.

The decision overturns a 2012 High Court ruling in favour of a couple who claimed that their former financial adviser’s “negligent advice” had lost them more than £300,000. The couple accepted an award of the (then) maximum of £100,000, but won the right to pursue the balance of the £300,000 loss through the courts. The maximum allowable FOS award is now £150,000.

The 2012 decision left the authorities in a state of conflict and raised concerns for financial advisers and their insurers as to the finality of the FOS procedure. It also left the FOS wide open to abuse by those with larger claims, who could seek an award from the FOS in the first instance and then use it as a fund to pursue litigation for the full amount.

The Court of Appeal concluded that a complainant to the FOS who accepts an award cannot then bring further proceedings in the courts to claim additional compensation – on the proviso that the financial institution or adviser being sued can show that the later court action is based on the same set of facts as the complaint to the FOS.

However, advisers may still fall victim to the FOS’s growing tendency to split complaints involving claims over £150,000 into a number of smaller claims – effectively circumventing the rule. The FOS can legally split complaints where the dispute concerns more than one legal entity, for example where there is a SIPP or trust involved.

This is because there is nothing to prevent the other legal entities bringing their own claim should they wish to. But the FOS seems to have been asking claimants to submit separate claims in high value cases where they involve different investments but only one advice firm and portfolio.

The FOS denies that it would ever seek to split complaints into separate claims purely to get around the £150,000 compensation limit. But why else might it do this in cases where there are no other legal entities involved?


FCA urges action on annuities

Rachel Vahey

Just before George Osborne hugely undermined the annuity industry in his 2014 Budget, the FCA presented a 35-page report (TR14/2) setting out its thematic review of annuities. The FCA found that the internal annuity market wasn’t working well for consumers.

Of those who didn’t switch provider, 80% could get a more generous retirement income by shopping around. In fact one in six people could increase their retirement income by more than 10% if they changed provider, and for people with severe health conditions the figure is potentially much higher.

The FCA’s study looked at an average pot size of £17,700 and found that by shopping around the yearly income could be increased by 6.8%, or £71. The median average annuity pot size for ABI members in 2013 was £20,000, so some people could get higher increases.

The FCA also looked at 13 annuity comparison websites, which allow people to purchase annuities direct but puts the responsibility of choice on the member. It found poor practice on all of the websites. In particular, the FCA considered whether or not the information provided about the services offered by these firms was clear, and if any associated costs were prominently disclosed. The FCA is now working with these firms to improve their offering and websites.

The FCA’s next step is to conduct a market study to assess competition. It will publish its interim findings this summer, and publish the final report – together with its proposed solutions – within 12 months. The FCA’s findings failed to surprise the industry. Acknowledging the importance of gathering proof, the general response was the results only reflected what everyone knew, and offered no new insights. In particular, the FCA came under criticism for not taking any action now, and instead conducting a further study.

It’s also important to note the FCA was critical of the internal annuity market. The external market, where people shop around, is working well. The ABI’s Retirement Code of Conduct became mandatory 12 months ago. Following the FCA’s report, the ABI announced that it wants its members to take new steps to help annuity customers.

By summer 2015, pension providers will have to offer their customers a conversation with the provider, or an impartial advice or guidance service, about their retirement options. These discussions will have to cover the retirement income alternatives to annuities. Providers will also have to offer a comparison of annuity quotes, or alternatively introduce the customer to an intermediary who can offer a comparison. The third improvement is providers will have to ask customers for information about their health and lifestyle, which they can use to shop around for enhanced annuity quotes.

The review has been partly superseded by the Budget announcement including increasing trivial commutation, and introducing the plan for complete flexibility about how and when to spend their pension savings. But there will still be some demand for annuities in the new world. It will be interesting to see where the FCA takes the next stage of its review in light of these developments.


FCA considers 15-year time limit on FOS complaints

Paul Thomas

A 15-year long stop on complaints to the FOS is being considered by the FCA.

In its 2014/15 business plan, published on 31 March, the FCA also says it will consult on new prudential requirements for investment advisers after it delayed new capital adequacy rules last September and pledged a “fundamental review”:

“We will consult on prudential requirements for personal investment firms. We will consider the case for a 15-year time limit on complaints to the Financial Ombudsman Service to review whether the current arrangements are delivering the best outcomes for consumers overall.”

An e-petition, “Fair Liability for Financial Advice”, which closes on 23 July, has gathered 4,906 signatures so far. If it reaches 10,000 signatures, the Government’s petitions committee can recommend an inquiry or seek a response from the relevant minister.

The FCA has been non-committal on the issue in the past and last reviewed the case for a long-stop in 2007, when it was rejected due to a lack of supporting evidence.

April Newsbrief

The latest edition of Newsbrief counts as 1 hour of structured CPD and covers the regulatory and marketplace changes which took place during March 2014. Visit the Money Marketing CPD Centre to answer 10 multiple choice questions and complete this CPD activity.

Just click into your CPD Plan and you’ll find each month’s marketplace changes round-up in your activity list.

Not yet registered? Join for free today at and access over 35 hours of independent, accredited CPD learning content. 

Learning objectives (full list of ApEx standards covered below)



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