The FSA has refused to give a firm commitment to reviewing whether a long-stop for financial advisers should be introduced.
Money Marketing revealed in August that Aifa had secured an amendment to be tabled on the long-stop as part of the ongoing House of Lords scrutiny of the Financial Services Bill, which establishes the Prudential Regulation Authority and the Financial Conduct Authority as the successor bodies to the FSA.
The amendment was put forward by Lord Flight earlier this week during a House of Lords debate on the bill. The amendment called for an additional clause within the Financial Services and Markets Act which would require complaints against financial services firms to be “brought within 15 years of the time of the act or omission”.
Speaking in the House of Lords, Lord Flight said: “Financial advisers are the only category of people who do not have a protection from the statute of limitations for a period beyond 15 years. In practice, this means that if there are any outstanding issues when a financial adviser retires, there is no closure.
“This is a messy situation and it is ultimately unfair to financial advisers and not helpful to clients, as it stops advisers being able to hand on or sell their business to others in the industry. I can see no fair justification why advisers should not enjoy the same protection as those in other industries.”
The FSA last reviewed the case for a long-stop in 2007 and said to introduce a cap on liability the potential detriment to consumers needed to be outweighed by the benefits greater certainty about liabilities would bring to consumers and IFAs. The regulator told the Treasury Select Committee in November the FCA “should review this issue again at some point in the future”.
Responding to the amendment, commercial secretary to the Treasury Lord Sassoon said the cost benefit analysis for introducing a long-stop “needs to be addressed” and that he had taken up the issue with the FSA.
Lord Sassoon said: “It has made a commitment that the FCA will consider whether to investigate the case for a long stop as part of its business planning for 2014/15.
“The timing of that is linked to the settling down of the RDR. I would encourage industry and consumer groups to continue a dialogue with the FSA on this topic.”
The commitment from the FSA is to consider whether to review the arguments for establishing a long-stop, rather than a promise to carry out such a review.
Lord Flight welcomed the focus on the lack of a long-stop for advisers, but suggested the judiciary as well as the regulator should be looking at the issue.
The latest development follows the work of Aifa and Zurich to move forward on introducing a long-stop as part of their Fair Liability for Advice campaign.
In a report published last month, Aifa set out a range of proposals to address the lack of a long-stop including the concept of “customer-agreed liability” which would cap liability at different stages of the advice process.