The FSA has issued a warning to small IFA firms that insert a long-stop clause into their terms of business.
In an update for smaller firms, the regulator says it will take action against IFAs who include a long-stop caveat into their terms of business.
The FSA says such a clause is likely to be contrary to cond- uct of business rules, may fail to meet outcome six of its treating customers fairly initiative and may be contrary to the unfair terms in Consumer Contracts Regulations 1999.
The FSA also says that a long-stop clause would not be binding with regard to 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.
“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.”
Churchill Investments director Chris Gilchrist says: “The FSA’s views on the long stop have been very well publicised so I cannot imagine there will be many IFAs out there who do not realise it is not allowed.
“It is no good IFAs thinking they can put a clause in that contradicts that because, as we all know, the FSA’s rules always win.”
Highclere Financial Services partner and Adviser Alliance director Alan Lakey says: “The FSA is within its rights to say it is not allowed but the point is if two adults want to make an agreement and the client accepts that IFA’s terms of business, then it is unreasonable for the FSA to override the agreement that two sensible adults have made.”