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Law firms question FCA execution-only disclaimer view

FCA technical specialist Rory Percival

Law firms have challenged the Financial Conduct Authority’s claims that disclaimers by execution-only firms may be insufficient to escape suitability rules.

Last month, FCA technical specialist Rory Percival said execution-only services could be subject to advice rules where customers believe they have received advice, and that a disclaimer stating “this is not advice” is not sufficient.

Percival said: “The customer’s perception is a very key determinant of whether it is advice or not.”

But Pinsent Masons partner Bruno Geiringer says: “Badly drafted disclaimers hidden in the small print which firms can then hide behind are clearly wrong. But genuine statements, properly brought to investors’ attention at the right time and written in plain language would be acceptable from a legal point of view. Somewhere along the line these issues are going to come up.”

Reynolds Porter Chamberlain partner Robert Morris says: “Often the line where a service moves from being non-advised to advised is a very fine one. Used properly, disclaimers can be helpful as long as they reflect the reality of the service being provided.

“It is going to be interesting to see what happens with the liability for execution-only services. At the moment this is an area of some uncertainty.”

Pilot Financial Planning director Ian Thomas says: “The question is whether the FCA can uphold its position in a court of law.”

The FCA has backed Percival’s stance on execution-only, saying it does not want to see customers left without recourse if something goes wrong in future.


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There are 9 comments at the moment, we would love to hear your opinion too.

  1. If it falls within the limits for FOS, we’re not talking about a court of law, we’re talking FOS.
    Anyway, most (not all) “pension liberation” requires the involvement of a regulated adviser. As such, Rory P’s position should help protect smaller investors from these scams as when they realise what has been encouraged (non advised and execution only my arse) and how much it has really cost them, they can pursue the now probably defunct adviser (falls to the FSCS then I am afraid, which is why it needs nipping in the bud as that costs us all) and if the FCA choose to do so, then they may be able to pursue the non-regulated firm I woudl hope.

  2. Why should the view of a lawyer, probably employed by a firm that relies on disclaimers to disguise self enriching sales marketing, get a regulator concerned? When a regulator determines that certain marketing methods are not in the public’s interest and can lead to inappropriate products being purchases by uncritical individuals, then it should have the power and guts to stand up against these self interested parties.
    When the ‘Law’ can be manipulated to act against the public interest in favour of a few, then the law is an ass.
    It does not matter how big or noticeable a disclaimer is, if it intends to rob clients of recourse, then this type of trading should be banned.
    It is not a fine line between advice and non advice, where someone proposes a set of solutions to a problem it has not checked to see exists, then it is advice. This includes any advert for a particular fund placed in a newspaper for general consumption that is available for unadvised purchase. A fund group may be allowed to advertise its brand but not individual fund performance. This should only be allowed where a number of fund groups investments are shown for information only. No table should be allowed only to include those funds that have paid for inclusion.

  3. An interesting point and one I tend to agree with. I’ve seen first hand people who think they received advice when, in fact, they were sold a product ‘unadvised’.

    Consumers often do not fully understand the legislative protection available nor the differing nature of advice.

    Small print is an interesting one – I’ve recently seen a ‘Will Writers’ website clearly setting out that they offer services and solutions which can be used to avoid care home fees – only to then say, in very small print at the foot of the page, that their solutions should not be used to avoid care home fees…. a complete contradiction but hey – the disclaimer is there!!!!

    Perhaps all clients should have to sign (or click!) a statement outlining the nature of advice (or otherwise) the transaction is subject to, whether that advice is independent or not and whether FSCS/legislative protection applies to the product.

  4. @Paul Stocks

    Maybe you are right. Clients using non-advice websites should have to click a button that acknowledges they know they haven’t had advice. All non-advice websites should be made to have this button displayed promenantly with an explanantion of what not getting advice means.

    Well that should be the very least they have to do.

  5. Simon Mansell 1st May 2013 at 2:46 pm

    But why apply natural justice and the rule of law to a regulator that is not accountable? The FCA is an unelected, unaccountable body of the executive. In constitutional law the executive is the part of government but separate with responsibility for the administration of the state, in our case the regulation of the state and its financial services.

    The government claims the FSA is independent because they have an eye to preserving the myth of the “separation of powers”, a constitutional issue because if the government and executive are one and the same you risk dictatorships where the different powers of government are assumed by one body i.e. no separation of powers.

    You see the executive FSA is not supposed to make laws (the role of the legislature) or interpret them (the role of the judiciary). The role of the executive is to enforce the law as written by the legislature and for its actions to be adjudicated upon by the judicial system.

    We all know this is not the case in financial services. The FSA is therefore an abuse of power in a democratic system and as such a danger to us all.

    Hector Sants snubbed the TSC on the 9th of March 2011 and now it’s time for you as elected MP to reclaim your powers and make our future regulator accountable to parliament.


    Simon Mansell

    Independence House, 4 Beckett Road, Worcester, WR3 7NJ
    T: 01905 75 77 48 F: 01905 75 77 49 E:
    © Temple Bar Independent Financial Advice Ltd.
    Directors: Simon Mansell BA(Hons) Law, (DipFA®) (Managing Director), Annette Mansell (Company Secretary)
    Temple Bar Independent Financial Advice Ltd is is registered in England and Wales at 4 Beckett Road, Worcester
    WR3 7NJ. Company Registration Number 3711518, which is regulated and authorised by the FSA.
    The value of investments can go down as well as up and you may not get back the full amount invested. The past is not necessarily a guide to future performance. If you withdraw from an investment in the early years you may not get back the full amount invested.

  6. The FCA commenting that they do “not want to see customers left without recourse if something goes wrong in future” suggests that they cannot conceive of a blame-free loss. Surely the very nature of genuine execution-only business is such that the customer accepts full responsibility for their actions and that they will not be protected to the same extent as an advised customer.

    If an execution-only provider acts fraudulently or breaches its obligations to the customer then recourse will be available. However, it does not seem appropriate for the FCA to sanction non-advised business on the one hand and then, on the other, seek ways to hold the provider liable if “something goes wrong in future”.

  7. I’m afraid Bruno Geiringer may not be entirely right. However genuine the statement about the service provided, it’s the activity, as defined under FSMA that counts. It’s also what a judge takes into account. If in doubt then consult the judgement in Rubenstein v HSBC 2011 where the judge said:

    “It is irrelevant whether Mr Marsden [adviser] thought he was only providing information or whether Mr Rubenstein [client] thought he was being given advice. The question is whether an impartial observer… would conclude that advice had been given.”

    Legally this is an objective test (the judge specifically said it was) so it doesn’t depend on what anyone ‘thinks’ or what either party says or provides.

    Anonymous @1.37 is correct. Indeed, if it falls under the jurisdiction of the FOS then everything else becomes largely irrelevant because it’s then down to what the Ombudsman thinks is fair and reasonable – and that is, for all practical purposes, beyond the law.

  8. Of course risk warning at the bottom of the website is not adequate to protect a firm from the normal advice rules. As we have seen on many of the unregulated websites including the recent problems with a well-known property company who is now in administration who had detailed information on pensions on their website and their agents actively encouraging clients to transfer monies from pensions into SIPP, so they can invest money into their investments scheme.

    Simply having a risk warning at the bottom of a website stating that the information given doesn’t constitute advice is not adequate and the regulator needs to stop this type of activity particularly when it is carried out by unregulated sites and individuals.

    This is a response I had from the FSA backing 2010 when I reported this company to the regulator, I think you all agree that this is shocking and just illustrates how badly regulated financial services was and how it needs to improve.

    “Dear Mr Herd

    Thank you for your additional comments. However, the firm’s website now appears to contain the necessary warnings regarding the issues you have raised and so it is not appropriate for the FSA to take any regulatory action at this time.

    I understand your frustration that their sales staff may be making inaccurate claims but the firm does refer customers to an FSA authorised firm for advice and we would expect an approved person to provide the best advice and to correct any misleading information which may have been provided previously.”

  9. It is quite clear that the public will think they have received advice when the site they use has a plethera of information and guides and best buy lists etc. on there – after all MAS claims it gives advice when it provides information and guidance so why wouldn’t the public think the same when they visit an execution only website?

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