6th March 2012

IFA letter of the week: Adviser Alliance

The lack of a 15 year longstop has caused concern for some considerable time. We have an incongruous position whereby the financial services industry is denied the legitimate protection of the 15 year longstop defence. Such a defence is available to every other profession including legal and medical.

Many organisations have threatened to challenge this but only Adviser Alliance has carried through with these good intentions. Talking is all well and good but we determined that the matter should be established by the courts.

Since early 2011, Adviser Alliance has been attempting to establish the legality of this position by seeking permission for a Judicial Review. The process is convoluted and extremely expensive.  AA has used funds accumulated from members' subscriptions and we have also received financial support by a conditional fee arrangement with our solicitors and ‘after the event’ insurance cover. As a result we have not had to go cap in hand to the industry for funding.

Judicial Reviews are not granted automatically, permission must be obtained and in this respect we have suffered repeated denials. In short, the judiciary considers that the FOS is able to ignore the conduct determined within SI2001/2326.  This is the statutory instrument issued by The Treasury which obligated the FOS to “take into account” whether the previous Ombudsman would have dismissed a case without consideration of its merits (such as being time-barred by reference to the 15 year longstop).

Had the FOS followed this instruction then the longstop defence would have been allowed for pre-2001 complaints.

The FOS has never accepted this directive and continues to ignore it when determining complaints where the advice was given more than 15 years before the complaint was levelled.

Last week we learnt that the Rt. Hon. Lord Justice Stanley Burnton, whose views are well known by established case law, has by his judgement decreed that the FOS is free to continue its abuse of legislation. He confirmed that the FOS only has to take SI2326 into account, in other words merely pay lip service to the established law on limitation that PIAOB complied with. Therein is justice at work.

It is now to Parliament that the profession must turn to right this democratic deficit by ensuring that the longstop defence is provided within the Financial Services Bill currently being considered in Committee.

Alan Lakey

Protection, Regulation, Adviser Letter of the Week, FSA/FCA