Sants says clients could sue IFAs over Iceland saga

Clients of IFAs who were advised to put money in offshore deposit accounts should sue, Financial Services Authority (FSA) chief executive Hector Sants has said. 

Answering a question at today’s House of Commons Treasury Committee from Graham Brady MP, on whether consumers were sufficiently aware of the regulatory status of foreign-owned banks in offshore jurisdictions, Sants said he saw no reason why anyone would imagine deposits with banks such as Kaupthing Singer & Friedlander Isle of Man (KSF IoM) would be protected.

But he said clients who lost out having been advised to deposit money offshore should take action. ‘If people feel they were mis-sold by a UK regulated entity and they have a case, they should sue,’ he said. ‘We’re always interested in hearing from people who feel they have been mis-sold.’

‘I would certainly hope events have demonstrated the importance of understanding the risk involved in offshore investments,’ he added. ‘That’s an important lesson for advisers to learn.’

TCF
Sants (pictured above) also faced questions about its perceived ‘retreat’ from conduct seperate treating customers fairly (TCF) visits from next month, instead integrating the TCF assessments into its mainstream Arrow visits to regulated financial firms.

He said TCF was ‘absolutely central’ to the watchdog’s role and should therefore be part of its day-to-day running rather than a side issue. ‘We think progress has not been as good as we would like,’ he admitted, saying the FSA would ‘turn up the pressure’ to get better results. The FSA has embarked on a major recruitment programme including over a hundred new supervisors, which will increase its supervisory capability by 20%.

Fraud prevention
The FSA will keep a close eye on advisers seeking to avoid the worst of the downturn by offering a wider array of advice, such as mortgage advisers moving into protection.

‘In previous recessions firms have tried to improve their income streams by going into other forms of business,’ said director of small business Lesley Titcomb. ‘They might go into products they’re not very well qualified to advise on.’ Fraud had historically risen in previous periods of economic gloom, she added.

Sants defended himself against the suggestion the FSA was finding problems where none lay. ‘We’re trying to anticipate events here,’ he said. ‘The whole issue of consumer detriment in a downturn has to rise up the agenda.’

Call for degree-level qualifications
Treasury Committee chairman John McFall asked why the recommendation from Lord Lipsey, former chair of the consumer panel, to raise the minimum qualification to QCA level six had been rejected. McFall said setting the qualifications benchmark at QCA level four showed a 'paucity of ambition.'