View more on these topics

FSCS to sue precipice providers for 30m

The Financial Services Compensation Scheme is pursuing precipice bond providers for up to 30m in an effort to recover cash paid out on misselling claims where the adviser firms have gone bust.


Letters have been sent to relevant providers in the last month, signalling the FSCS’s intent to recover the money it has paid out to investors who had successful claims against adviser firms that have gone into default.

Aifa director general Chris Cummings welcomes the move and believes it could help lighten the future compensation burden on advisers.

David Aaron Partnership, RJ Temple and Berry Birch & Noble Financial Services have had the biggest number of precipice bond misselling claims against them out of those firms declared in default.

The FSCS estimates it has paid out around 30m so far in relation to precipice bonds, with 18.5m paid out last year. It paid a total of 201.22m in complaints for 2005/06.

A lawyer who is involved in the dispute says: “It is the duty of the adviser to understand the product details, if the product is appropriate for the client and to advise carefully how much to invest in it. The FSCS will have an uphill struggle proving provider responsibility.”

An FSCS spokeswoman says: “We cannot comment on specific recovery actions but we can confirm that we are pursuing recoveries in relation to compensation payments made for the misselling of precipice bonds. We seek to make recoveries where we consider it reasonable to do so, to reduce the cost to levy-payers of compensation payments made by FSCS.”

Beachcroft Regulatory Consulting managing director Richard Hobbs says: “This is a further example of the regulatory authorities trying to look through the adviser channels to product providers. It is evidence that regulatory authorities are uneasy at the position they find themselves in with regard to the relationship between advisers and providers.”

Recommended

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment