This article is a bit of a stab in the dark. I remain confused about Jon Maguire's objectives and tactics. It is possible that my article and Jon's will pass like ships in the night.
I have more questions than answers. Is the process being clearly spelt out? His course takes him through the various levels of the UK courts up to the House of Lords and then, ultimately, to the European Court of Human Rights.
He cannot expect the authorities, in the event of a judgment against them, to accept it without appeal and short circuit the process. He will not get much change from his £1m. Has he identified a test case, displaying the particular characteristics which he wishes to challenge?
Second, what are his time-scales? It is not easy to give an average timescale for a case to grind through all these judicial stages but it is years, not months.
Third, why now? We are just embarked on the review of the FSA and the related legislation. Has he considered whether it would not be quicker and cheaper to make the case for reform in connection with the review (as we are doing) rather than lash out on legal bills?
Take the FOS issues. After pushing from the industry (including Aifa), the Treasury agreed that this review should extend to the Ombudsman. Doesn't a court case now simply introduce planning blight for its duration? He is exercised by the FOS case fee – so am I.
That is why I welcomed intimations from the FOS that it will be consulting on a firm having two cases examined next financial year, with no case fee charged. Court action should not put this sort of initiative on hold.
Fourth, has Maguire considered the downside and factored in the law on unintended consequences? There is no guarantee that a court will not make matters worse. The last court intervention led to a judgment which increased the costs of recompense. The effect and impact of a judgment cannot be ringfenced so that IFAs avoid any downside.
For example, if a court ruled that the principle of full and final settlement had to be revisited in pension review cases (and I would not hold my breath), it will be just as possible for some consumers to demand extra top-up compensation from an adviser as it will be for IFAs to claim that others were overcompensated. Anyone for Russian roulette?
Fifth, has Maguire estimated the likely benefits of his action and set them alongside the costs? If there is going to be a lot of money raised, then we should know whether the game is worth the candle.
Maybe his real target is a definition of misselling. I think that I can guess for free how a court will define this elusive term (which paradoxically never appears in the FSA rulebook). It will say that adherence to all the FSA rules and guidance will ensure that nothing is missold which arguably gets us no further.
The FSA attempt to define misselling was less helpful than I had hoped but it contains nuggets of value (such as the statement that the rules and standards to be enforced are those in place at the time of sale, not some retrospective reconstruction). We need to build on these by setting out what I have called stakes in the ground indicating for future regulators what constitutes best practice in advising in particular areas. But those stakes have to come from the industry, not a court. Just what we are working on.
Sixth, has Maguire looked at the history of judicial reviews against regulators across all sectors? Not much comfort there – successful actions against statutory bodies are rare. The prospect of litigation can be made to appear very seductive. So too were the Sirens and they drove ships on to the rocks.
Paul Smee is director general of Aifa