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FSA to monitor non-dealing covenants for consumer detriment

The FSA says it will be “keeping an eye on” any possible consumer detriment over non-dealing clauses following industry concern that some deals could breach treating customers fairly rules.

Raymond James head of compliance and legal Mark de Ste Croix says such clauses can go against TCF rules as they may prevent clients from taking advice from the adviser they choose to work with.

He says: “I would like to see the regulator step in and look at these clauses which can be against the best interests of the client if such a clause is preventing that client from working with their chosen adviser.”

TCF outcome six says: “Consumers do not face unreasonable post-sale barriers imposed by firms to change product, switch provider, submit a claim or make a complaint.”

Non-solicitation clauses prevent advisers who are leaving a firm from approaching clients, usually for a set period of time. Non-dealing clauses aim to stop advisers from continuing to work with clients from the previous business altogether, usually for a 12-month period.

An FSA spokeswoman says: “Although there are no specific plans to bring non-dealing clauses under scope of the regulator, it is an area we are aware of and are keeping an eye on. If there was significant complaints from consumers about these clauses it would be something the FSA supervision team would look at.”

Forty Two Wealth Management partner Alan Dick says: “It comes down to the client and the fact that nobody owns them and they should be free to make up their own minds.”


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