Advisers are urging the Financial Conduct Authority to create a level playing field on capping advice liability after it emerged that firms in default are subject to a 15-year long stop but those that continue to trade are not.
The Limitation Act 1980 states that claims for negligence must be brought no later than 15 years after the act or omission occurred.
As part of the act, claims must be brought six years from when the problems relating to the act or omission emerged, or three years from when the claimant should have reasonably been aware of a problem.
The Financial Ombudsman Service subscribes to the three- and six-year rules, but not the 15-year long stop.
However, in a letter to Highclere Financial Services partner Alan Lakey last week, the Financial Services Compensation Scheme said it did comply with the 15-year long stop.
An FSCS spokeswoman confirmed this but says it has the discretion to disregard time limits “where appropriate to do so”, for example, if the person did not have the knowledge or opportunity to bring the claim in the time period.
Lakey says: “The least you would expect is cohesive regulation. The regulator should be embarrassed about this disparity. Common sense says you would have the same criteria for both schemes. The FOS needs to be brought into line with how the FSCS operates.”
Informed Choice managing director Martin Bamford says: “There is a lack of fairness in the way adviser firms are being treated. It would be good to see a level playing field for both advisers and consumers as the regulatory framework we have now is a mess.”
Pilot Financial Planning director Ian Thomas says: “It would be helpful to have some consistency or why would advisers keep their firms open?”
An FCA spokesman says: “Our current view is that there is not enough evidence to support a long stop.
“We agree with the conclusions of the Treasury select committee in its RDR report in July 2011 that ‘any long stop would need to be clearly in the interests of consumers’.”
An FOS spokesman says: “We have our own timeframes as laid out by the regulator. The FSCS is a different organisation and is guided by different rules.”