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No safe harbour for IFAs as FSA &#39fails&#39 on misselling

The publication of the FSA&#39s long-awaited definition of misselling has been met with resounding criticism for failing to provide a safe harbour for IFAs.

Trade bodies and IFAs have branded the attempt a failed opportunity which does not get to the nub of the issue. They also say the professional indemnity insurance market will not be affected by the definition.

In its advice, published last week, which does not take the form of formal guidance, the FSA rejects the notion that it should provide “an exhaustive set of specifications by way of a safe harbour”.

Instead, it reiterates its commitment not to embark on retrospective misselling reviews and cites its inability to launch widescale reviews without the approval of Parliament.

It highlights the importance of consumers taking responsibility for their financial decisions and says it is the initial suitability of the sale rather than the long-term performance of a product which will be considered when determining misselling in the future.

But the industry says all of this is rehashed material, with nothing new added in terms of a definition that IFAs can refer to when advising clients to ensure they are within the boundaries.

LIA head of public affairs John Ellis says: “They have rejected providing a safe harbour when that is exactly what the industry wants.”

Aifa director of policy Fay Goddard says: “This really does not get to the nub of the issue. I hope going forward we will have more confidence but I doubt it will affect the PI market.”

Pensions & Investment Management principal Phil Moore says: “This so-called definition does not make me any more confident that I can give financial advice and not fear a future unjustified misselling claim.”

FSA spokeswoman Louise Buckley says: “We are not going to provide a safe harbour. The industry would be hampered and compromised if we were to go through all the possible scenarios where misselling could occur.”

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