View more on these topics

FSCS loses appeal over landmark High Court advice ruling

High-Court-Royal-Court-Of-Justice-Building-480

The Financial Services Compensation Scheme has lost a High Court appeal in a landmark case which could radically change the way it assesses compensation claims for poor advice.

The case was brought by Charmaine Emptage, who was advised by Berkeley Independent Advisers mortgage broker Peter Sharratt to exchange a £40,000 repayment mortgage for an interest-only mortgage of more than £111,000. She was also advised to invest over £70,000 in Spanish property.

When Berkeley went bust and the Spanish property bubble burst in 2009, Emptage made a claim with the FSCS. It initially rejected Emptage’s complaint, then awarded her £11,522.98 in December 2010, saying it would only award compensation in respect of the mortgage advice and not on losses related to the unregulated Spanish property purchase.

High Court judge Mr Justice Haddon-Cave ruled in October that Sharratt’s negligent advice was an “indivisible package” and that Emptage should be put back in the financial position she was in prior to the unsuitable advice. The FSCS appealed in November.

In his judgment on the appeal, published this week, Lord Justice Moore-Bick said it is difficult to see how the FSCS judged a fair level of compensation given the original unsuitable recommendation.

Evolve Financial Planning director Jason Witcombe says: “Although there is no doubt some investors need to be fully compensated for poor advice, it will be dangerous if people start getting compensated for all their losses regardless of the merits of the case.”

FSCS chief executive Mark Neale says: “We have a duty to consider all claims objectively according to our rules. We believed we acted properly in deciding the claim by Ms Emptage and that we were unable to compensate for the full loss because we do not protect investments in property.

“However, the Court has found in the claimant’s favour and FSCS accepts the decision. We will consider the implications of the judgment for our handling of similar claims.”

Recommended

Application standards

Application standards Is behavioural economics the way forward for advice? Chris Davies The FCA wants firms to adopt behavioural science tools to ensure that any financial advice, services or products offered do not take advantage of human nature. Eight weeks into the new regime and we are already witnessing a distinct change in regulatory style. […]

3

Friends Life refuses 500 pension transfers over liberation fears

Friends Life has turned down 500 requests to transfer pensions since August over fears around liberation schemes. This means Friends Life is blocking more than one suspicious transfer every day into “high-risk schemes” with the total value of these requests standing at more than £12m. Friends Life says it follows The Pensions Regulator’s guidelines on […]

My Beautiful Career: Ashok Shah

What was your first job within financial services? After finishing my A-Levels in 1970, my cousin suggested that I look at actuarial science and I got a job with a life insurance company working in the actuarial department. The job looking after policyholders, calculating surrender values, evaluating sums which could be taken out as policy […]

CBI: Collective DC requires ‘fundamental culture shift’ in UK pensions

The Confederation of British Industry says Government plans to encourage large employers to offer collective defined contribution schemes would require a “fundamental culture change” in UK pensions. The Department for Work and Pensions is investigating how to make it easier for employers to set up pooled funds into which employees pay their pension contributions. In […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment