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FSA says long-stop clauses are not allowed

The FSA has issued a warning to small IFA firms against inserting a long-stop clause into their terms of business.

In an update for smaller firms, the regulator says it will take action against those IFAs who include a long-stop caveat into their terms of business.

The FSA says such a clause is likely to be contrary to Cobs rules, may fail to meet outcome six of its TCF initiative and may be contrary to the unfair terms in Consumer Contracts Regulations 1999. The FSA also says that those who insert a long-stop clause would not be binding on the Financial Ombudsman Service.

The update says: “It has now come to our attention that some firms may consider inserting a long-stop clause in their terms of business. One of the key functions of our regulatory regime is to protect consumers. A long-stop clause may be inconsistent with that regime if it seeks to exclude or restrict any liability a firm may have to a consumer.”

Previously, the FSA concluded that it will not introduce a long-stop because it has been unable to demonstrate that it would bring additional benefits to both consumers and firms.

The newsletter continued: “ We recognised that many in the industry would be disappointed by this decision.” 

However, the update said: “We would not consider acceptable any approach by a firm which purported to exclude or restrict a customer’s right to pursue a complaint against a firm with the FOS or before the courts. Accordingly, we would expect to take follow-up action with any firm adopting this course.”

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Comments

There are 15 comments at the moment, we would love to hear your opinion too.

  1. I think most TOBL or ‘Client Agreements’ have the following statement – This client agreement is governed and shall be construed in accordance with English Law and the parties shall submit to the exclusive jurisdiction of the English Courts.

    Why do the FSA think they can go against English Law courts who will have a 15 year time limit max?

    Why does the article state they are warning ‘small firms’ – what about the big firms who cause most of the damage. Oh easier to bully small firms!

  2. In open forum could I ask those at the FSA who are trying to intimidate the (small IFA) rather than all Financial services firms
    to respond publicly to these questions.
    1) Are you personally prepared to give an open ended commitment being responsible and LIABLE for your actions?
    2) Are you prepared to forgo you right to English, Welsh, Northern Irish and Scottish law, or an appeals process?
    3) Are you personally prepared to give up your human rights, by the removal of your 15 year longstop?
    I bet you this post will not get a reply from anyone at the FSA…
    PLEASE PROVE ME WRONG

  3. The words “may” and “likely” don’t put any stakes in the ground, very woolly words.

    With regard to: “it has been unable to demonstrate that it would bring additional benefits to both consumers and firms.” This is an impossible task, there is absolutely no way you can prove “consumers” would benefit, is there?

    Why “small firms”?, because they are invariably sole traders and, under this regime, will be liable forever.

    Why attack “small firms” with comments like these? Because they are the only ones with the strength and conviction to speak out while demanding that the law is simply upheld, and because they are easy targets.

  4. After May it is unlikely that the FSA will exist in its current form.The Conservatives have clearly indicated their support for a long stop to bring the industry in line with the Law.

  5. In open forum could I ask those at the FSA who are trying to intimidate the (small IFA) rather than all Financial services firms
    to respond publicly to these questions.
    1) Are you personally prepared to give an open ended commitment being responsible and LIABLE for your actions?
    2) Are you prepared to forgo you right to English, Welsh, Northern Irish and Scottish law, or an appeals process?
    3) Are you personally prepared to give up your human rights, by the removal of your 15 year longstop?
    I bet you this post will not get a reply from anyone at the FSA…
    PLEASE PROVE ME WRONG

  6. The second Sunday in November, is the day traditionally put aside to remember all those who have given their lives for the freedom we enjoy today, but we have not always enjoyed such freedoms and there is no guarantee these will continue unless we fight for them.

    Throughout history we have seen the abuse of power and the loss of the Long Stop is one such example. Consider this: In the common law of England, a “Writ of Outlawry” declared the subject was no longer human, he had no legal rights. Outlawry was thus one of the harshest penalties in the legal system, since the outlaw could not use the law to protect himself if needed. The FSA applies Outlawry to those it regulates. When Gordon Brown was asked to show legal opinion that the FSAMA 2000 did not breech the Human Rights Act, he failed to give these opinions.

    However, in 1998, two years before the FSMA 2000 Lord Lester of Herne Hill QC and Monica Carss-Frisk were of the opinion that the FSMA 2000 was bad law and in breach of the Human Rights Act. Anthony Speaight QC took this view also. Gordon Brown claimed that he had legal opinion to say the FSMA 2000 was compatible. Well when challenged he refused to release this – I wonder why!

    The FSA are quite happy to have the independent sector “outlawed” so they (the FSA) can do as they please. IFAs must ask themselves if they are happy with the status “outlaw” because with regard to financial services they have no rights other than those the FSA deem to allow.

    When the IFA is questioned about his/her commission and worth – ask back how much one should be paid in exchange for these common law rights and remember the price that has been paid to defend these rights over the centuries.

    SIMON MANSELL
    TEMPLE BAR IFA LTD

  7. The FSA statement contains the words “may” and “likely”, does that indicate that they are not 100% confident that their view on the long stop would be upheld in law. I just wish all IFA’s would pay into a fund so we could use legal ‘big guns’ to pick a fight with the FSA/FOS on the lack of long stop and RDR implications to bring clarity on our legal rights. I’m stick of listening to the FSA/FOS making it up as they go along, especially when I’m funding them to do so!!

  8. The FSAs new webpage is based on two letters to my firm and are very woolly as they refused to read the document we had drafted before issuing what we believe to be threats. They MAY fail the unfair contract terms as they are not as clear as we would like which is why we tried to speak to the FSA to improve the outcome for consumers and achieve a fair balance between client rights and responsibilities and those of any small firm who do not have an unlimited budget to defend (or even pay out when not liable) on stale claims.
    If anyone would like a copy of the communications which were all by email from the FSA, including the threatening letters, these were all sent mentioning and subject to Freedom of Expression legislation so I am happy to email them to anyone who wants them. I’ll email the offending documents too although they are again being re-drafted with absoultely NO help from the FSA to ensure they are simpler ONLY as what was intended was NOT to exclude a clients right to rely on English Law, but to COMMIT the client TO the rule of law and not an arbitary system using hindsight and commiting the client to taking prudent actions (i.e. taking fresh advice) during a reasonable timescale proscribed by English law OR forfeit rights to an infinite right to complain. I am not bothered about the length of the longstop (and the ministry of justice aren’t eitehr it would appear as they intend reducing it to 10 years), all I am interested in is removing INFINITY as I cannot picture it and bearing in mind my LIFE is not infinite unlike a corporation or a charity, I will not submit myslef or my family to infinite liability without a fight…….

  9. The FSA do not even know the rules that apply to the industry they regulate.

    The FSA says such a clause is likely to be contrary to Cobs rules, may fail to meet outcome six of its TCF initiative and may be contrary to the unfair terms in Consumer Contracts Regulations 1999.

    If they only think ‘may’ and ‘likely’ then how the hell have we got a chance of knowing??

    The more they open their mouths the more I cringe.

    TCF was the current FSA’s own initiative with the vast majority of staff still here.

    They make up regulation that even they cant understand and they wrote it.

    God help us all.

  10. Well said Ian, that was my point when trying to get to speak to the FSA BEFORE they sent me the agressive letters MAY is a funny word, it gives no comfort. I have been a man for the last 44 years, legally I MAY become a woman, but I have no desire or aim to do so.

    My AIM was not to breach ANY of the terms the FSA implied by their letter, in fact quite the reverse, especially the bit about restricting a clients right under English law and courts, it was to emphasise the law and courts as NOT all the servcies we or many firms provide ARE regulated activities and in fact if you look at what you truly do as an educator of clients, practically 5% of what we actually do is regulated and RDR might just result in us saying “right” I awill no longer reccomend a product or a provider, I will educate you about your options, research and find information for you all within this time cost and you can then decide what action to take yourself Mr Client.
    The FSA MAY yet live to rue the day they were so wishy washy on what truly is or is not legal for their own ends.

  11. Alan Lakey - Adviser Alliance 21st November 2009 at 9:10 am

    Adviser Alliance is committed to fighting instances where the regulator seeks to impose unreasonable and/or illegal terms on advisers.

    After a protracted birth Adviser Alliance is now poised to attract members and compile funds to meet the costs of the inevitable Judicial Review.

    Apologies to those potential members who have waited patiently whilst we started the process.

  12. Agree Phil.

    What is getting me really fed up about the FSA is they answer subjects such as these as if they had nothing to do with the rules. They wrote them.

    They should know their own wording and what it means.

    They should understand Europe’s regulations and be able to interpret them for us all.

    They authorise product so they cannot say afyerwards that they did not know what the product trends are in the industry and pretend it is not their fault that new product or popular product is not checked for potential weaknesses.

    They appear to hold the belief that they, with their 100s of million pounds of budget cant understand legislation or check product but a small business with £30k to £150k of profit should know everything about regulation and products that the FSA either wrote or authorised!!

    Insane.

    How long can thisa regulator keep writing post mortem accounts of what went wrong befopre the media, public and opposition party eventually realise that the FSA has a hand in all of these issues?

    They write the regulation. They appear to not understand looking at their comment above.

    They authorise products they clearly do not understand.

    We just sell and advise authorised products.

  13. Why does the FSA no agree to a longstop, as surely the amounts of compensation is dwarfed by the amounts of taxpayers funds wasted due to regulatory failing of this regulator. I will be be happy to commit to no longstop if messrs McArthey, Sants, and Brown carry a personal commitment the costs of their combined failings. If its good enough for us IFA’s then surely the same rules can apply to the bosses of the FSA etc

  14. depressing really to spend my sunday night having to catch up with the crazy uk. i left the uk and ifa dbs over 10 yrs ago and i am now dragged back in it again with a silly claim and these advisory companies-god the stench. i asked a fos person the other day, how long must i be accountable for ridiculous claims? and she says ‘well you were an advsor so u r always responsible- BUT I HAVE NO DAMM RIGHTS- I LOSE DO NOT PAY AND THEN I AM TAKEN TO COURT AND THE COURT WILL SAY WE HAVE NO JURISDICTION-PAY UP- OR COURT JUDGEMENT AND BANCRUPTCY- JESUS CRIMINALS ARE TREATED FAR BETTER. MY CRIME?: I SIGNED UP A STANDARD LIFE ENDOWMENT ON A MORTGAGE AND TICKED THE BOX THAT THE CLIENT WAS BALANCED- THEY NOW SAY THEY ARE CAUTIOUS. THERE IS NO CRIME IN THAT!

  15. It’s all just a big shake down;scam. client lies havng taken the advice of the complaint advisory’group- fos gets the 450 fee, advisory and client shares the compensation.
    I already paid one where the client claimed after paying a pension for 2 years she did not know it was a pension! 400 a month she paid. so they let her keep the fund- in their words it was a trivial sum (8000 tv since it was charged on single recurring premium basis- but fos did not understand that).All money paid back plus interest and she got the shares when scot eq went public. I was definatly on the wrong side of an awful industry-GOOD LUCK TO YOU GUYS WHO KEEP TRYING.

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