Long stop: how to deal with old complaints

This is a really good feature.

Steve's comments are especially valuable.

Many a time I have tried to help an IFA with a complaint, asked whether such-and-such an issue was covered off at the time, only to find that it was - but the advisers recollection of dates, who was spoken to etc is vague.

"Where's your meeting notes or your phone note?" I ask.

"I don't have to do those, do I?" et cetera

Getting client's to acknowledge reports, RWLs is a good move. I would add: -

- in higher-risk cases, get the client to specifically confirm his *understanding* of the key downsides (list them and give a yes/no tick box to each).

- generally, see the Report/RWL/Plan as a key part of your advice process, to be delivered *before* the client enters a specific transaction; don't treat it as a mechanical nicety that merely 'ticks a box'.

A related point is the value of using imaging systems going forward rather than relying on paper-based records you might ultimately shread or store remotely with the risk of loss...

On the general issue of a long-stop, one of the infuriating things about the current set up is that larger entities with heavy liabilities can easily afford the costs of 'restructuring' (or if they're particularly badly run, pre-packaged administration deals etc) and parking these with the bank of you & me...Whitechurch? Honister Capital? Old Towry Law?

...yet a small directly regulated firm like Paul's, with a long history, will have these things potentially hanging over them, causing these stresses and degrading the ultimate resale value of the business...

We record ALL of them as well as the client meetings and save those against the client now. if we HAVE got it wrong, that is what our PI cover is for and by listening to the recordings we will not try to defend the indefensible. We will however go hammer and tong if a client refuses to listen to the recording to here what actually was said BEFORE they go to the Ombudsman (FSA handbook DISP 1.4.3 01/11/2007

The respondent should aim to resolve complaints at the earliest possible opportunity, minimising the number of unresolved complaints which need to be referred to the Financial Ombudsman Service

If the client and their ambulance chaser don't want to listen before taking a complaint to the FOS, the FOS should sent it straight back telling them to do so before they look at it.

We've just got our first potential complaint after 11 years and ironically it is one of our first cases where ALL meetings were recorded, we look forward now to seeing whether the solicitor involved tries to proceed to the FOS BEFORE listening to the recordings as we have already listend to every minute of them and know exactly what WAS said.

The thing I have learnt from this, is that their is a reason why the house of lords establihsed 15 years as a longstop and that was to achieve a fair balance and peace of mind for all parties. the F-packs current stance on the longstop flies in the face of the TCF initiative and their discussion paper about consumer responsibilities is a mockery by it's title alone as they stated discussion of the longstop was "out of scope".

The law is the law and without it we have anarchy and that is what the FSA currently is anarchy directed and influnced by political expediency rather than the rule of law.

If we are to be outlaws, then the F-pack should expect us to ract as outlaws when or if complaints are brought and supporetd by them after 15 years in anything otehr than the exceptional circumstances described in their own rules

DISP 2.8.2 06/11/2008

1, 2The Ombudsman cannot consider a complaint if the complainant refers it to the Financial Ombudsman Service:

(1) more than six months after the date on which the respondent sent the complainant its final response; or

(2) more than:

(a) six years after the event complained of; or (if later)

(b) three years from the date on which the complainant became aware (or ought reasonably to have become aware) that he had cause for complaint;

unless the complainant referred the complaint to the respondent or to the Ombudsman within that period and has a written acknowledgement or some other record of the complaint having been received;

unless:

(3) in the view of the Ombudsman, the failure to comply with the time limits in DISP 2.8.2 R or DISP 2.8.7 R3, 4 was as a result of exceptional circumstances; or

If you read it as the rules were written, then actually clients are timebarred after 6 years except in exceptional circumstances wheras the law is actually fairer to the consumer than the FSAs own rules as it effectively says the judge will consider a case up to 15 years and that is it whatever the circumstances.

If we are giving ongoing advice to a client upon a product or service allready given, then as our advice is what is/may be deemed professional negligence, it should not be when the "product" was arranegd that the measurement is from, but when advice on that "product" was last given. i.e. if someone comes for advice, has it and never seeks or pays for advice again, 15 years and you are out. If they pay for advice (even from anotehr adviser in the 15 year period), then there IS another 15 year longstop from that date in law for the new adviser OR for the existing one for negligence on teh advice to keep or dispose of the "product" as it eitehr emains suitable or has ceased to be.

The sooner we stop thinking as the product as the measurement, the sooner we MIGHT be able to have a meaningful dialogue with the FSA on true consumer rights and responsibilies and those of adviser and product providers.

FSA let's start the debate now, STOP refusing to dicuss it and playing politics with adviser and their clients lives. My clients are as p***ssed off with the FSA over the FSAs actions on the longstop and I can prove it (unliek them) as I have the recordings of what my clients say on the subject. Do the FSA have any evidence that consuemrs actually don't want us to have a longstop? Did they ever consult on the issue of the longstop before it mysteriously fell out of the handbook when the change from PIA to FSA occurred? Were we warned when becoming directly regulated that we were effectively waiving our common law rights to a longstop by accpeting FSA jurisdication (how can you accept something which is statutory!)

In the very real world unfortunately there were / are advisers which the industry has to try to protect clients from, equally over a period say 25 years, we still do not appear enough to protect the sound adviser against cleints own agendas,chnages in their loyalty to individuals or firms,who can be "encouraged" by other professionals to raise complaints going back over many years which take some unravelling especially as rules and compliance requirements appear to have changed / evolved almost as frequently as the seasons.

If as an industry we feel strongly about ensuring that clients always receive excellent advice and service, then EQUALLY we must ensure our proven sound advisers are not unjustly hounded through some blood lust.

Dealing with the suitability letter and advice is obvious good sense but it is still somewhat like bandaging a skin cancer and hoping that all will ed up well.

The actual disease itself must be eradicated and that means capping liability after 15 years duration.

Regardless of the emasures taken no firm or individual can feel safe when the FOS is empowered to make new law and apply retrospective thinking to its decisions.

As a fundamental element of its very constitution, the FSA should be banned from persecuting the industry by way of its endless succession of hindsight reviews. It would be interesting to hear/read a statement from Hector Sants attempting to justify such a regulatory modus operandi.

Hindsight reviews amount to nothing more than the FSA shifting onto everyone else responsibility for its own gross and manifest failures as a regulator. We pay, the FSA fails to do its job properly (but still those bonuses never stop) and we have to pay again.

Denial of the longstop is inextricably intertwined with the FSA's policy of reviewing everything by hindsight, and until the latter is outlawed, we can never be free of the former.

The FSA needs to be torn down and reconstituted from scratch, starting with accountability to the industry it presently misregulates and sanctions not bonuses for failure.

Wasn't entirely happy when I say the finished article as I come across as some complaining numpty. The point was that everything had been done in accordance with the "rules" and more. I was, at the time, the first in that company to print off all risk warnings and get clients to sign next to them so there could be no doubt whatsoever what had been said. This particular complaint related to an issue that was not flagged by the regulator as an issue until several years later yet AVIVA glibly said that "you could have said that...." which was nonsense.

Since the article went to print I have had a retraction from AVIVA (no connection I might add) as I was right that they could not apply todays standards to yesterday's advice.

My point about the long stop is this. Say, in 4 years time, the regulator then says all investment recommendations must carry the warning " You should consult a solicitor before committing to a financial plan" or something equally ludicrous. You, however, retired before this came in and 10 years later you receive a complaint that the regulator wants to uplhold because " you could have said that...." when you could not possibly have had prior notice that it would become a requirement.

Though the lack of a long-stop is frustrating and unfair, firms should always consider time-barring at the outset of any complaint over 6 years old, as complaints can often be time-barred under the "3 year rule" on careful examination.

Indeed, FOS invite representations on this issue (indirectly by referring to "jurisdictioin") in their opening letter.

In my experience FOS will not raise a time-bar issue themselves, but can be surprisingly receptive if a firm raises such an issue backed up by evidence from the file. So the key is to go through the entire file in detail, and through any information provided by the complainant, to see if there is anything to trigger the three year date of knowledge which occurred more than three years before the complaint was made.

Look at any adjudicator's decision on time-barring carefully and don't be afraid to ask for an Ombudsman's decision if you don't agree with the adjudicator on this issue. I have seen some terrible reasoning from adjudicators on time-barring which demonstrates that they really do not understand the issue and their own rules on the subject. An ombudsman will usually at least understand the issue and address it properly.

Phil/ Alan/ all,

Phil - re:

"b) three years from the date on which the complainant became aware (or ought reasonably to have become aware) that he had cause for complaint; "

Please see Alan's post.

Alan is quite correct, that the 3 year rule can come into play.

However, as a result, this can negate the 15 year long stop (potentially).

Take a hypothetical 25 year Endowment. Client receives a "red" warning letter from the product provider in the 16th (up to 24th) year and complains BEFORE 3 years after receiving that Red letter.

According to FSA rules and regs they are within the time limits and not therefore (your post) ".....clients are timebarred after 6 years ..... " - as this is not an ".... exceptional circumstance[s] "

Papershuffler

Good point which is why a longstop IS needed otherwise we have infinite liability.

There is the example of this where an accountant, an IFA and a solicitor are all involved with an investment case involving a Trust. The perpetuity rule means the trust can last for 80 years. The Solicitor and accountants are free to rely on the longstop after 15 years, the IFA is still liable even after 80 years as the investment reccomended and held in the Trust may be open ended. This is why the FSAs refusal to discuss ANY longstop is discriminatory. They could try and justify a 25 year one or perhaps even a 40 year one, but they have been lazy and NOT justified having no longstop whatsoever. For my mind 15 years (as decided by the house of lords) IS a fair balance and as I understand it the Ministry of Justice is discussing reducing it to 10 years and I think we need to fight for our clients rights to keep the longstop for solicitors and accountants at 15 years (and get ours back in to the bargain)

Dear Paul

If the FSA introduced some clear rule like that (i.e. must include a warning with a prescribed wording), this would be very easy to deal with...the RULE would clearly apply from a set date...and not before...

Much of the problem of retrospectivity (by FOS or indeed by the Compliance Industry generally) is instead one of interpretation - or rather shifting standards being applied to interpretation of fixed but vague rules.

In your case, there was (and always has been) a rule requiring advisers to give clients warnings about the 'relevant' risks in terms they're likely to understand - it was in the adopted FIMBRA rules for example. In this case, Aviva are *interpreting* this provision to mean that you should have included such-and-such-a-warning, even though the interpretation at the time was very different.

The problem arises because we have no clear GUIDANCE on practice standards in this industry. An accountant aiming to ensure "true and fair" view, for example, has detailed Accountancy Standards explaining how this can be achieved.

Our professional bodies instead focus on exams alone - whilst FSA shifts the meaning of higher-level rules on suitability and those conveniently vague "Principles".

To illustrate, a few years ago I found myself defending a complaint against one of our adviser in respect of a final salary pension that had been transferred to a PP for PFW back in 2000. The lawyers for the complainant, a distinguished City firm, robustly asserted that our adviser had failed to address this "pension transfer" properly...I was able to refute this by referring them to the clear definitions and standards set out in PIA RU55: it wasn't a pension transfer as such and the standard of competence expected of the adviser was merely one of 'awareness' not 'understanding' of the occupational scheme issues...There wasn't a rule breach and hence there wasn't cause for action under s.150 blah blah...With the benefit of hindsight, I have no doubt that 9/10 pension specialists would not be impressed by how that case had been handled at the time. (I wasn't!) But it was clearly within the defined standards and the claim against us did not succeed.

BTW, I for one certainly did not tink you came across as particularly grumpy; you have good cause to raise these issues and you speak for many IFAs when you do.

Phil,

Good example. Well, to my mind, the only way around that case - if no longstop can be considered - is to start putting together Contracts where the IFA/ Financial Services professional formulates advice and services on a 'joint and several' liability basis (with the accountant and solicitor in your example).

Naturally, this would only work for cases where other professionals are involved and - crucially - if all ALL in the Industry were to work on that basis (otherwise professional advantage would result in the accountant and solicitor looking for a non-joint and several contract).

As for the general question, perhaps the client signs some sort of voluntary warranty/ indemnity - legal binding & naturally only if they want to engage with that IFA/ Financial Services professional - prior to advice given/ sale made.

Would be interesting to see (hypothetically) if such a warranty/ indemnity would or could stand up in court......

(Alan H ?)

Papershuffler

Obviously you were aked to proof read the article before publication?

Sorry "asked". I should have proof read my post.

The problem with trying to use the 3 year rule is the interpretation of it by the FOS. Disp rules state - “a consumer must generally complain to a firm within six years of the event complained of, or if later, within three years from the date on which they became aware (or ought reasonably to have become aware) that they had cause for complaint.”

The question of what, “ought reasonably to have become aware” means determines the jurisdiction issue.

The FOS sets the bar sufficiently high that few arguments using this defence are accepted. Walter Merricks once stated that FOS “makes new law” and you know what? He was right.