Appointed-representative contracts are tightly drafted to confer rights on networks after termination of a contract by the member or the network. Again and again, members contact us to ask what can they do to protect their position.
Members leaving networks find it a whole lot harder than members being welcomed into the fold. Networks have every right to protect their regulatory position and, with increasing frequency, use the commer-cial stranglehold they have to enforce this.
A couple of interesting issues arise with the termination of an appointed-representative contract.
Payment of fees and commission
The termination of a member agreement usually invokes a final settlement of commission and a retention to protect against indemnity risks and regulatory costs.
A network does not have to accept a termination and may stoutly refuse to do so until all outstanding issues on its agenda have been cleared.
This does not give networks the right to starve the appointed representative of earned monies.
You would be surprised just how many niggles and compliance issues can arise to prevent the payment of a final sum.
The method I would advocate is to understand clearly the position on termination before resigning. If the termination is forced on you then you should be in a position to respond quickly.
Unfortunately, many appointed-representative agreements are drafted very widely, which allow the niggles in.
Be clear and request the final schedule of outstanding issues prior to any closing visit. The closing visit is a wonderful excuse of bombarding members with lists of unattended items which undoubtedly string out the whole process.
If your contract requires you to make copy files to match the regulation then that needs to be attended to. What many contracts do not do is specify who should pay. In that case, insist that the network undertake to pay for the copying. Stand your ground. This is no reason to delay payments owed to you.
Where you have an indemnity commission you will need to agree where the liability would fall if a clawback were to occur.
You cannot expect monies to be released to you until the liability has been moved away from the network.
You need to be aware of the position and make your mind up early. Are you going to receive the monies as the indemnity reduces or are you going to novate? If you achieve a novation, tell the network and request payment immediately.
While it is not in your account earning interest, you are losing money.
Remarkably, many app-ointed-representative agreements do not require pay- ment of interest on monies held on your behalf.
Look at the protection clauses on monies you owe and you will see another story – base rate plus 4 per cent and other charges are not uncommon.
When you have worked out what you are owed ask for it. If the network does not pay up without good reason then simply add interest.
You have a statutory entitlement to interest on debts when they are not paid past a due date. The contracts are fairly irrelevant once you request payment of a debt owing.
The Lincoln Five and Spring case shows how dangerous it is for organisations to give incorrect references.
The “industry debt” reference is used without thought on many occasions where people receive references claiming that an industry debt is outstanding.
In many cases, monies owing relate to disputed charges and membership issues. If you feel that you have received an unfair reference, then prima facie you have a claim for damages.
Appointed-representative contracts are easy to get into, very difficult to get out of. Make sure that you understand the termination provisions of your contract.
Be careful if you plan to leave to go elsewhere. Consider the termination clauses and the effect on cashflow of payments being held back. Be prepared and plan how to counter the issues raised.