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Networks may face huge IFA review claims

IFAs could hit their networks with claims running into tens of millions of pounds over the cost of the pension, FSAVC and endowment misselling reviews, according to financial services law firm ProAct Legal.

The law firm is writing to thousands of network members offering no-win-no-fee participation in a class action against their networks.

ProAct principal Gareth Fatchett has obtained a barrister&#39s opinion that he bel-ieves gives IFAs fresh hope of recovering some of the indemnity excesses claimed by networks.

Firms could argue that the very reason they pay network charges is to avoid review costs for negligent advice according to ProAct.

It says networks are pro-mising compliance with one hand but pushing away responsibility for it with the other hand.

But the networks argue that such claims have failed in the past because IFAs contract to take on board responsibility for such costs and because the compliance sup-ervision they gave was the best available at the time.

Fatchett responds that the courts have never considered whether networks failed to fulfil their contracts by not foreseeing the reviews.

HE says: “The barrister&#39s opinion is very encouraging. Most network members have paid out on reviews and if a precedent is set, the total cost to networks could be in the tens of millions.”

A DBS spokeswoman says: “Our contract has a general indemnity clause that has been held up in court. When our guidance was issued, it was given with the best knowledge at the time. We cannot give guarantees or acc-ept responsibility for retrospective reviews.”

PMI Independent Finan-cial Adviser director John Stewart says: “If this case were to succeed it is good news for IFAs but some networks would not be able to take a hit like that. IFAs might find it difficult to find a new home.”

Legal column, p40

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