An effective 15-year long stop has been introduced by the FSA on advice that is investigated as part of a consumer redress scheme.
The FSA was given new powers earlier this year to create consumer redress schemes to deal with specific market failures.
In a guidance note on the new schemes, the FSA says: “The power is limited so that the only failures a scheme can address are those a court or tribunal would find to have been failures at the time the activities were carried on rather than a subjective assessment by the FSA of the reasonableness of a firm’s actions.”
Aifa says this means that advice reviewed through consumer redress schemes would have to be measured against legal standards rather than those of the FSA or the Financial Ombudsman Service and therefore the statute of limitations would apply, which gives all professionals a long stop. Advice that does not fall under a specific consumer redress scheme would not be subject to a long stop.
Aifa director of policy Andrew Strange says: “Because this is based on a court situation rather than the FOS powers through FSMA, there is a statute of limitations – there is a long stop. So anything over 15 years is out. I think this is the first time we have achieved some element of a long stop within financial services.”
It is up to the Treasury to decide to enact the new powers that have been granted to the FSA before the regulator can make a consumer redress scheme. The long stop would apply to advice under specific consumer redress schemes where there has been widespread or regular firm failures.
Highclere Financial Services partner Alan Lakey says: “To get back a long stop in any form would be marvellous. The long stop was never mentioned in the Financial Services and Markets Act, therefore it did not exist.”
The FSA looked at introducing a 15-year long stop for IFAs as part of the RDR but said that the industry could not come up with compelling evidence to support its introduction.
The joint Parliamentary committee on human rights launched an investigation into the lack of a 15-year long stop for IFAs in March 2009 but this was dropped last November.