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How we lost the long stop

Much nonsense has been written about the 15-year long stop and its confiscation by the FSA. A great deal of this misinformation is designed to cloud the issue and confuse matters to the point where industry activists lose the will to carry on.

There are some facts that are not yet etched in the industry’s memory and these tend to be matters of inconvenience to a regime which remains intent on restricting advisers’ basic legal rights.

On September 18, 2003, the FSA board assembled to discuss the 15-year long stop. The resulting minutes, which remained secret for over five years, have been obtained by the IFA Defence Union under a freedom of information request. Authored by then FSA chief executive John Tiner, they confirm the board was asked to consider whether to reintroduce the long stop and also to support Tiner’s preferred option, which was to leave matters alone. In setting out the options, he inaccurately stated: “The FOS have confirmed that they only occasionally consider cases beyond six years.”

This, as any adviser will attest, is beyond incorrect.

The annex to the minutes advised: “We did not consult on having a 15-year limitation period when the dispute resolution rules were consulted on.”

This statement stands in direct contrast to the content of Lord Myners’ recent letter to the joint committee on human rights. In attempting to deflate the issue, Myners declared: “The Limitation Act 1980 does not apply to the FOS, a point that was discussed and considered when the Financial Services & Markets Act 2000 was being debated by Parliament.”

Parliament never debated the issue, which is verified by a search of Hansard. Nor did the FSA, Personal Investment Authority, Securities and Investment Board or any other regulatory body publicly discuss or consult on the removal of the long stop.

Additional matters of importance flow from the following paragraph from the minutes of the 2003 FSA board meeting: “The general counsel advises that the way in which Schedule 17, paragraph 13, of the FSMA is framed suggests that Parliament intended the FSA to be able to set time limits which can differ from those of the Limitation Act.”

Now, ignoring the fact that the Government has refused to state whether it sought legal advice on whether the FSMA is in conflict with the Human Rights Act, we have the bare statement that the FSA’s general counsel supposes that Parliament intended the removal of advisers’ legal right to use a long-stop defence. Let us revisit this, he does not actually know, he merely supposes this to be the case.

Schedule 17, paragraph 13, reads, “The Authority must make rules providing that a complaint is not to be entertained unless the complainant has referred it under the ombudsman scheme before the applicable time limit (determined in accordance with the rules) has expired. The rules may provide that an ombudsman may extend that time limit in specified circumstances.”

It can be seen the wording provides no such intent. By contrast, former FSA managing director David Kenmir confirmed the FSA could not override statute and neither could anyone else nor any other body.

Those conspiracy theorists who consider advisers to be black pawns on a chess board where the Government and its various agencies control two white queens now have additional evidence for their beliefs.

Lest we forget, the Limitation Act has not been repealed and therefore both the FSA and the FOS are acting beyond their powers in ignoring the legitimate legal defence of the 15-year long stop which is afforded to every other person, profession and institution in the UK by Parliament.

Alan Lakey is a partner at Highclere Financial Services

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