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Shock High Court ruling allows investors to sue after FOS award

by Daniel Grote on Jan 04, 2013 at 10:17

Shock High Court ruling allows investors to sue after FOS award

A High Court judge has delivered a shock ruling that investors who accepted the maximum award from the Financial Ombudsman Service (FOS) can pursue their adviser through the courts for more money.

The ruling clashes with a landmark court judgment made two years ago, that accepting a FOS award ruled out court action over the same compliant.

Judge Ross Cranston has ruled that investors Barry and Julie Clark are free to claim further damages from In Focus Asset Management & Tax Solutions, despite the adviser firm having paid £100,000 compensation following a FOS judgment. That payout was the maximum the FOS was able to award at the time, although the limit on FOS claims has since risen to £150,000. The pair have alleged they incurred losses of £500,000 after being mis-sold endowment policy plans following the sale of their business and premises.

In making his judgment, Cranston disputed the ruling of judge Mark Pelling in 2010 that investor Mr Andrews was not entitled to pursue adviser SBJ Benefit Consultants through the courts because the firm had already paid compensation following a FOS judgment. Pelling’s ruling hinged on ‘the doctrine of merger’, which dictates that if a complainant has received a final judgment in a ‘tribunal of competent jurisdiction’ they cannot then pursue the same complaint in court.

Cranston said: ‘In my respectful view the judge in Andrews was wrong to regard the doctrine of merger as applying to the determinations of the Ombudsman.’

He argued that the FOS should not be characterised as a ‘typical tribunal’, in that its role encompasses mediation, and that it issues non-binding recommendations.

Cranston also dismissed arguments from In Focus lawyers that the wording of Ombudsman rulings, that firms should pay ‘in full and final settlement’, meant complainants could not take any further proceedings. ‘It seems to me that for a complainant to use an award of £100,000 to finance the legal costs of bringing court proceedings for a greater amount is not inconsistent with the statutory aims [of the FOS],’ he said. ‘In my view the term “final” simply means the end of the Ombudsman’s process.’

In his concluding remarks, Cranston said that as the ‘doctrine of merger’ does not apply to Ombudsman cases, ‘nor does the statutory scheme preclude those like the [investors] in this case from claiming damages from a financial services provider for an amount in excess of the Ombudsman’s determination, which they have accepted’.

41 comments so far. Why not have your say?

Paul Barnard

Jan 04, 2013 at 10:38

Hopefully this principle will apply to the judiciary too. If they sentence someone to too short a sentence, having congratulated their "courage" as a burglar, if they re-offend when released the judge will will liable to compensate the new victims.

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Duncan Carter 2

Jan 04, 2013 at 10:46

Two problems here are the terms 'not binding' because it is binding on one party which then leads to the next problem which is 'final settlement'. It is final as far as the firm is involved because it has no ability to appeal what are sometimes very arbitary decisions.

This point needs to be clarified and should include whether if having accepted the redress ordered by the FOS the claimant then sues for further compensation, the entire claim should be heard in court not simply the 'surplus'. I suspect many FOS adjudications would be overturned in court through lack of evidence on the part of the claimant.

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William1209

Jan 04, 2013 at 10:48

I'm assuming that this also allows the Court to overturn FOS's (usually misguided) original award??

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Mr Man

Jan 04, 2013 at 10:57

This ruling is good news for the consumer. They can seek redress twice where the FOS level of compensation is wholly inadequate.The ability to potentially hit the advising firm twice should serve as a warning. The recent discussions concerning stripping Directors (CF1's) of advice firms of "Limited Liability" protection where blatant mis-selling has occurred from their firms is also welcome. If their personal assets are up for grabs it should stop all forms of poor advice immediately.

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Ian Lees

Jan 04, 2013 at 11:02

Given the FOS only deal with selected complaints - and can only provide compesation of up to £ 100,000 - it would be reasonable that when found guilty by the fickle ombudsman " service" , who act on behalf of insurance companies and product providers - rather than look at how any reaosnable judge would act - seems to give rise to this judgement. I do not know the background - but it would appear rto be reasonable that if losses are greater than the £ 100,000 awarded that legal action could provide remedy. After all banks negotiate their fines with regulators and hector spanks - so why the astonishment. If they have bene fiddled out of theri finances by someone - surely they are entiled to be put back in the same position they were in - and not fiancially disadvantaged. I wish the same could happen to my pension cash equivlaent out of the lousey scottish widows retiremnent benenfits scheme - where fraud was perpetrated by the Trustees of Scottish Widows and Scottish Equitable - now Aegon

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A Sick SIPP Owner

Jan 04, 2013 at 11:04

Interesting, but probably not of much use to those who were persuased to invest in ARM bonds by Rockingham as, following the regulators actions on the fund, Rockingham are now in liquidation/liquidated, and, as the FSA knew, they were trading without PII.

Join the arminvestors.com forum, and maybe start at http://arminvestors.com/armforum/index.php?topic=497.new#new

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neXus 6

Jan 04, 2013 at 11:07

I foresee a problem here. What if the court case comes to an entirely opposite ruling i.e. that the FOS decision was wrong?!

The idea of trying the same case simultaneously through separate judiciary systems is broken. I wonder if the right thing would be to reject the FOS award if inadequate and then pursue for the correct amount in court?

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Paul via mobile

Jan 04, 2013 at 11:08

Well that a death nail in the coffin of FOS.

Willians1209 - unless legislation changes, no - which has always been an issue. Other than a judicial review (which are extremely hard to do) once an ombudsman has made a ruling, it is binding on the firm.

The complainant didn't have to accept though and so it was supposted to be only binding on them if they accepted it.

FOS could and did make suggestions that compensation of over £100,000 should be made, but this was not binding on either party.

So the courts have just destroyed all of FOS good work. Fingers crossed this judgement will be appealed.

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The Rumpo Kid

Jan 04, 2013 at 11:20

The article states that the investors were mis-sold endowment polices resulting in losses of £500,000.

Endowments policies??!!

Incredible...

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neXus 6

Jan 04, 2013 at 11:26

@Rumpo: the losses were £500k so what the heck were the sums invested?

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Tony_Laverick

Jan 04, 2013 at 11:28

The FOS should not be allowed to get involved where the extent of the claim exceeds the FOS' limits. Aggrieved investors would still have the Courts to fall back on but this nonsense permitting double remedy is a farce.

This must have been one heck of an investment to be placed in Endowment policies of all things. Greedy investors advised by greedy advisors.

Careful Ian Lees - haven't you learned anything from Lord McAlpine?.

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Michael Kent

Jan 04, 2013 at 11:47

What price indemnity insurance? Who in their right mind would want to offer it at an affordable premium? There may be trouble ahead.... may have already arrived!

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Ian Lees

Jan 04, 2013 at 11:48

Losses £500 K - jings . . . . and criven's . . . . . an' help ma' boab - as we say in The Beano ( Dundee . . . . comic - not yet knighted ? ). @ Rumpo is that " Rumpo of the bailey ? " the legal centre - not the sweet fancy licker

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neXus 6

Jan 04, 2013 at 11:54

@ Michael Kent. Exactly. If I were a PI provider, I'd run a mile from financial services of any kind because you cannot quantify risk with a regulator who changes the rules more frequently (with the same unintended consequences) than the IRB.

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Philip Milton

Jan 04, 2013 at 11:55

This is wrong. The scheme rules are the scheme rules. If clients don't like them, then don't join the party and only invest with a Firm up to the single FOS limit. If you accept the FOS ruling as a full and final ruling then that should be absolutely it as the previous judgement stated. The complainant doesn't have to accept the ruling and can then sue for the whole sum. It is wrong and inequitable to have 'both'.

However, I agree that often arbitrary FOS judgments may not win in Court so the costs' award against the plaintiffs may make them think twice and thankfully the no win no fee band-wagon is tightening come April.

However, I trust all advisers are charging fees which reflect the vulnerability they face for providing advice - the protection the clients enjoy and for which they must pay.

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Hickky

Jan 04, 2013 at 11:56

I would love to get more insight into what was sold to these people. My betting is offshore single premium endowments to offset loss of BPR. Either the firm failed to look after its clients (must have been a large initial investment) on an ongoing basis, or the money was invested in some iffy funds to earn the advisory firm increased income.

To have losses of 500k something was amis, but it is interesting that Mr & Mrs Clark accepted recommendations and paid a huge cheque to the firm, so something attracted them to this solution that subsequently failed to occur.

I wonder what it was?

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The Rumpo Kid

Jan 04, 2013 at 11:57

@ Ian Lees: I aint no lawman. The Rumpo Kid is outta Stodge City.

That fancy licker is ma pardner Dram Buwey...

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Paul via mobile

Jan 04, 2013 at 12:07

Losses were due to Geared Investments in TEPs!

Just reading the judgement (haven't finished it yet) but it appears the FOS Ombudsman made an error in saying they could accept his judgement and then sue for the balance and one of the parties lawyers made a mistake too!!!

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Keith Robertson

Jan 04, 2013 at 12:17

This is an important decision which I, for one, broadly welcome. I find some of the preceding comments, many anonymous, very telling - as if every complainant were the opposition, even the enemy. Any one of us, or from our families, could be a complainant in the future. Where the proven loss exceeds the statutory compensation limits, it has always been irrational that further redress was apparently barred. As pointed out by other commentators, the only alternative till now has been ruinous full-blown litigation from the outset.

I agree that the FOS hands down some curious, occasionally perverse, adjudications. Nevertheless, it provides a very cheap and relatively quick service. While it might appear that this High Court decision means the FOS will be seen as a 'free test' first step on the road to a larger claim, I can see no reason for this expanded process to be attacked. Complainants who pursue defendants through the courts will still have to meet the normal evidential tests to win and risk significant financial cost if they fail.

In my view we should all support a system (which requires some application of the doctrine of caveat emptor) where an investor, having lost a large amount of money through another's proven fault, has every chance of full redress. This decision does not amount to "heads I win, tails you lose." We have all chosen to work in a profession which literally finances the FOS, but any decision or size of award by it should not limit an innocent party's right to seek further damages where the loss is large.

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Ian Lees

Jan 04, 2013 at 12:46

Nice one " Fred " . . .now then Fred - lets take down the ceiling, that there ceilings just gonna have to go . . . . or have another cup of tea

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Paul via mobile

Jan 04, 2013 at 12:54

Keith Richardson - I agree with some aspects of your post but I disagree most strongly about "proven losses".

A court may find that there is insufficient evidence to confirm an advisor failed in their duty and therefore there is no proven loss.

A good example would be if FOS said I was guilty and I am therefore required to pay the maximum amount possible (which is now £150,000) and I paid that to you. You the use some of that money has FOS said the actual loss was £500,000 and a court of law days I am innocent? Even of the court awarded me costs, I might not get back the FOS award level!!!

Doesn't sound like justice to me.

As others have said, it might help if FOS only looked at cases below a certain level - so this kind of problem will not happen.

Lastly, will the FOS Ombudsman be dismissed for gross misconduct in failing to confirm the FOS Rules - I hope so!!!!

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Jonathan Kitchin

Jan 04, 2013 at 13:12

This will provide claimants with a £150k "fighting fund" to recoup any additional losses via the High Court, but victory there would by no means be guaranteed.

Whereas before, the claimant would have to choose whether the £100k or £150k "in the hand" via the FOS was worth the entirety of their losses "in the bush".

Where investors have lost significantly more than £150k, that is a difficult decision to make and often tied up with whether PI cover has been confirmed.

In practical terms, if the PI insurer is picking up the FOS liability then it also ought to be picking up any additional liability via the High Court (if the claim has been properly notified, no exclusions apply and the proposal or renewal form is accurate...).

However, I fully expect this decision to be appealed as the precedent value is worth multi-millions to the insurance community.

In the meantime, insurers are likely to become even more engaged on coverage issues and how FOS complaints are defended. I would triple check policy wording and tread carefully!

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Polfers

Jan 04, 2013 at 13:15

The Bottom Line in all this is that no one knows where they stand anymore.

How in God’s name can anyone be expected to operate a business long term under this constantly moving feast of uncertain and potentially cataclysmic threats.

Regarding your comments Keith (Robinson), then whilst I can see totally where you're coming from with respect to innocent parties, you must surely still recognise that it would be naive to assume that all claimants are innocent parties and that right “will-out”. It won’t.

Witness the mounting number of ads in such publications as the Daily Mail asking the public if they have “been advised to buy a financial services product at any time from a financial adviser, as they may have a claim”.

Very recently, I had a long standing client contact me – he is an extremely nice and decent guy – he’d called to ask if I thought it would be a good idea to sue a previous adviser (someone I knew well and who would not have been party to any intentional miss-selling), as he’d had a letter from a claims company saying they understood he had once been advised to take out an ISA and that he could have a miss selling claim. The client went on to explain that the adviser had invested him in a £6000 ISA investment that had done very well for a couple of years, but was then hit by the dot-com bubble and had lost about a third of its original value, at which point he’d cashed it in, crystallising his loss (!!!). I asked if he’d understood that it was by nature a high risk investment, and he said “oh, yes, the adviser had explained all that and it was made clear to me what the risks were.... but this letter says it won’t cost me anything to make a claim and I still might get something, what do you think I should do?”

This, folks, is what we’re now up against, where even normally decent, honest clients are being cajoled and tempted on the promise of almost certain compensation and to give it a go, for they absolutely nothing to lose.

If we do not make a stand on these issues, many innocent parties that are advisers and their families will also suffer, and suffer badly. The next bandwagon is upon us, and it seems we have little in the way of being able to defend our position even when we are the innocent party.

This type of judgement may well be serving justice in this instance, but it similarly pours petrol on the fire of those out to encourage bogus claims for anything and everything and, in a culture where it's often cheaper to pay up for an illegitimate claim than it is to fight for justice, we are indeed in a lose - lose scenario I'm afraid.

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Philip Milton

Jan 04, 2013 at 13:21

Without wishing to patronise but Keith's comments are naive and suggest he has never had any dealings with the FOS or the Courts.....

Caveat emptor needs to apply at the point of making the decision to invest in the first place after considering the advice given. If you accept that, then the terms of any protections are also accepted surely. The FOS states that an award can be rejected and neither party bound by the findings and the complainant allowed to pursue the firm in Court already - not BOTH.

Courts are manned with infallible human beings and a system which is archaic and seriously costly and where a case can be lost on procedure and not the facts. I should not be at all surprised to find that a Court would rely upon the FOS judgement to sway its own opinions, however flawed and lacking in evidence the assumptions.

Professional advisers are not there to indemnify clients if something/anything goes wrong yet was not through clear negligence at the point of service (when hindsight is easy to use to condemn naturally). What about investing in GIlts now? Residential Property? The lost opportunity by missing equity returns (it has to come...). Failing to allow for inflation?

The scheme is not infallible but that is the scheme to which clients sign-up, effectively. They don't have to take an award if they fancy their chances in Court.

As someone else said, there is NO RIGHT for the advisory firm to challenge an Ombudsman judgement either. A Judicial review is allowed only to investigate the processes the FOS has engaged - NOT the decision. Perhaps someone should try to challenge such injustice again using European Human Rights' legislation.

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Ian Lees

Jan 04, 2013 at 13:32

Why not give him a Knighthood ? for injustivces . . other people seem too get them ?

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A Sick SIPP Owner

Jan 04, 2013 at 14:34

@Michael

Considering the need for indemnity insurance, I believe that the regulator should, as part of their responsibility to "Protect the Public" be required to offer indemnity insurance to IFA's.

As they 'Regulate' the IFA's they can set limits on the business level, and consequently the liability that may occur.

That PII should include cover for all the business performed by the IFA while they are paying for the insurance, and it should not be limited to claims made within that period.

The IFA's should not be required to take up the PII provided by the regulator, but should be required to maintain cover that matches, or exceeds that offered by the regulator.

That way the IFA's who are prudent will not have to be paying via FSCS levy for those who are not operating appropriately.

Considering this case - I would have expected the insurer to be either already be aware that the advisor was doing business in this range, or to be approached for cover for that specific transaction.

@Philip, Yes it may be appropriate that 'clients' limit their business with any organisation (group) to the FOS limit, and that the FOS limit be applied at the point of business, rather than claim - that would address the possibility of groups merging.

But that means paying many fees for a fund for a reasonably large pension investment (say £700,000) and will the advisor who reccomended & assisted in the sale of the poorest performing fund be liable for the loss when compares to the best performing one?

Then again, I'm still waiting for a regulatory body,Yes - any of them to actually take responsibility, as far as I know:

As in the 'product' was listed on the ISE - but does not appear to have satisfied the requirements to get that listing

The FSA knew there were problems with the PII of Rockingham and kept that from the public.

The FSA knew there were problems with the client assessment process at Rockingham and kept that from the public.

The FSA knew there were problems with the product 'risk' assessment process at Rockingham and kept that from the public.

The FSA knew there were problems with the 'glossy' detailing the product for sale by Catalyst, and kept that from the public.

Yes - they did tell those organisations to contact clients and advise them of the 'errors' and offer refunds, but did they check their 'instructions' had been obeyed?

What the 'Regulators' have done is stop the fund paying out to the investors, freeze funds in accounts paying (I understand 0.1% interest) and then declare SLS based funds to be TOXIC - so who will dare to reccommend such funds now

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Tony_Laverick

Jan 04, 2013 at 15:06

@An arminvestors.com member

You are at great risk of being sensible.

The FSA would not be competitive so would the market use it as a means of increasing the premiums?

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Bob Donaldson

Jan 04, 2013 at 15:40

The problem as I see it is that client gets two bites of the cherry. If they do not get full satisfaction with FOS, they go to court for the rest and as someone has stated, you can use the initial compensation £100k/£150k to pay for the lawyers.

However, what action can the advisor take. He is bound by the FOS ruling so he has nowhere to go.

Surely it should be accepted by the client that they can go either way, through FOS accepting its limitations or through the courts surely not both.

Secondly it is all very well some people sympathising with the clients and I do where blatant miselling has taken place, but this brings back the matter of the long stop. Do you really wish to retire only to find that something goes wrong with an investment you did ten years ago and are then pursued by a former client!

What about the splits debacle, sound investments where nobody was aware of the incestuous relationships between the various fund management groups with all the cross holdings etc.

What about the endowment debacle, with profits bonds etc. Investments that at the time seemed to be perfectly reasonable but came back to haunt investors and advisors.

It seems to me that the playing field is now tilted so much in favour of the client is becoming time to exit the industry.

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A Sick SIPP Owner

Jan 04, 2013 at 15:46

First - sorry to all, the latter part of my post was supposed to start:

"Then again, I'm still waiting for a regulatory body,Yes - any of them to actually take responsibility for some of the ARM fiasco, as far as I know:"

While I doubt that PII provided by the FSA - FCA now? would be 'competitive' against the current PII providers, there are major problems with (most) current PII provisions:

The advisor pays annually for claims made in that year rather than for work done in that year.

The Insurer has to set a cost based on what their client says they will be doing, and the Regulator doesn't (have to) tell them what the client is actually determined to be doing.

The insurer can 'withdraw' the cover so avoiding the cost of claim for bad work done while they were collecting the premiums.

Now that's not a PONZI scheme, but consider the process facilitates the take in of 'premiums', and the avoidance of later paying out .

The insured client has no actual contract with the insurer, so has to take action against the (transient, and probably bust and soon to be defunct) ex-client of the insurer.

Having an 'insurance' facility that protected the investor, and the industry rather than the insurer and the bad practicioner would go some way to relieving the stress on both, by the lessening the requirement for a FOS & FSCS who uses the post-bad-practice- levy process to deal with the effects of past failures by the FSA who's management have gone back to work in the 'industry' with their splendid bonus's, golden goodbye's and nice pensions.

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Rebus Fortissimus

Jan 04, 2013 at 16:29

To boil this down to the 2 key audiences:

1. What does this mean for investors?

They are no longer at the mercy of the ombudsman whose decisions are at best inconsistent.

2. What does it mean for advisors?

An increase in the amount of compensation paid out; a likely increase in the cost of professional indemnity insurance, more insolvencies as IFA’s try to shirk their liabilities

Well said KR.

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Mister Curry

Jan 04, 2013 at 19:40

I read with interest all of the foregoing. Some thoughts: I wonder if another angle might be that FOS is being used as an initial "test-bed", with the larger compensation cases going on to court afterwards. Investors are in the main greedy - it's why they do what they do! - but most are not experts and so must to some extent seek/rely on professional guidance. Also, referrals to FOS will only be accepted if the plaintiff indicates "no" to the question "legal action being considered?" - so this in itself may explain the "two bites of the cherry" situation... Still, if I had lost £500k I think I would pursue every and all possible avenues to recover it! One for the lawyers, I suspect. Will there be a time limit on retrospective claims flowing from this judgement? What now is "full and final settlement"? This element of the case alone could lead to chaos...

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Keith Robertson

Jan 05, 2013 at 10:12

Guys,

This is how law is made, so there is no point in worrying about conspiracies against intermediaries, or perceived flaws in some FOS adjudications.

The main legal points turn on the status of the FOS as a tribunal, and the doctrine of merger – i.e. the ability to bring essentially similar proceedings more than once – the “two bites of the cherry” which concerns some correspondents. Judge Cranston is very clear:

First, the FOS does not have the status of a court, being set up to deal with complaints, not legal proceedings, and therefore the legal doctrine of merger does not apply. That means complainants have the right to use the FOS, and then use the courts also, if they wish.

Secondly, although the Ombudsman’s adjudication is ‘final’ and binding on both parties if accepted by the complainant, that does not mean ‘final’ in the colloquial sense – only that that’s as far as the Ombudsman’s powers extend. As the doctrine of merger now (after this case) does not apply, that permits the complainant to start full legal proceedings though the courts.

That should not, in principle, scare our profession. Bear in mind that the court system has to comply with the law in all respects, while the FOS does not. It also costs a great deal of money to litigate, which will inhabit most complainants – unless they believe the evidence in their favour is exceptionally strong. The evidentiary burden is significant, and normal legal processes of discovery and disclosure apply, which are rarely if ever used by the Ombudsman. In other words, if the complainant turns out to be one of the greedy, grasping, lying and cheating clients of nightmares, I suspect an intermediary will have a far better chance of strict ‘justice’ than under FOS rules.

So, by no means all bad news. On top of which, we should want to work within a profession where a badly advised client has every opportunity of obtaining full redress. Supporting this is good for reputation and good for business, not bad – unless you are unscrupulous or prone to providing crap advice.

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Keith Robertson

Jan 05, 2013 at 10:14

Guys,

This is how law is made, so there is no point in worrying about conspiracies against intermediaries, or perceived flaws in some FOS adjudications.

The main legal points turn on the status of the FOS as a tribunal, and the doctrine of merger – i.e. the ability to bring essentially similar proceedings more than once – the “two bites of the cherry” which concerns some correspondents. Judge Cranston is very clear:

First, the FOS does not have the status of a court, being set up to deal with complaints, not legal proceedings, and therefore the legal doctrine of merger does not apply. That means complainants have the right to use the FOS, and then use the courts also, if they wish.

Secondly, although the Ombudsman’s adjudication is ‘final’ and binding on both parties if accepted by the complainant, that does not mean ‘final’ in the colloquial sense – only that that’s as far as the Ombudsman’s powers extend. As the doctrine of merger now (after this case) does not apply, that permits the complainant to start full legal proceedings though the courts.

That should not, in principle, scare our profession. Bear in mind that the court system has to comply with the law in all respects, while the FOS does not. It also costs a great deal of money to litigate, which will inhibit most complainants – unless they believe the evidence in their favour is exceptionally strong. The evidentiary burden is significant, and normal legal processes of discovery and disclosure apply, which are rarely if ever used by the Ombudsman. In other words, if the complainant turns out to be one of the greedy, grasping, lying and cheating clients of nightmares, I suspect an intermediary will have a far better chance of strict ‘justice’ than under FOS rules.

So, by no means all bad news. On top of which, we should want to work within a profession where a badly advised client has every opportunity of obtaining full redress. Supporting this is good for reputation and good for business, not bad – unless you are unscrupulous or prone to providing crap advice.

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Austin Mason via mobile

Jan 05, 2013 at 13:45

Does it follow then that should the FOS find in a clients favour the adviser could then sue the client for the amount awarded to them if they feel the award was grossly unfair because a material loss has been created?

Obviously it would be a high risk strategy but is it now theoretically possible?

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Paul Howard

Jan 05, 2013 at 21:26

Keith - you raise some good points (as does Austin).

The problem is - Lawyers will get paid win or lose - and so unless they think they have no hope of winning - they are more likely to to commence more proceedings - or more likely threaten proceedings.

I can well imagine going something like this

"Well Mr Adviser, you have been found guilty by FOS, but the client has been unable to receive all they are due to those stupid rules - to avoid your costs going up (as you will have to pay your own defence costs AND our costs when we win), why not pay the full amount FOS suggested, and avoid the delays, additional costs and no doubt further bad publicity that will occur. Just send your cheque for £X to......"

About the only good thing that could occur - which the FSA will not like, which is what Austin suggested - if the Firm complained about loses with FOS - they pay the award and then commence legal proceedings of their own.

The firm loses - bad pubclicity etc - but if found 'guilty by FOS' might well be the best solution - to prove they are innocent.

Which is why the Judgement just makes no sense.

If the award might be significantly more than the FOS levels (remember, firms may pay above the levels anyway) - you go via the Courts.

If it's less than FOS levels - you let FOS deal with it a lower cost manner - if the Complainant doesn't like the result - they still can go to Court.

Whats wrong with that?

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Ian Lees

Jan 06, 2013 at 11:59

There is nothing wrong with getting paid for doing nothing - ask ordinary hector sants - prior to his being handed a knight hood - and polishing his chair in Barclays - the LIBOR fiddling bank. A solicitor is asked to conduct a job on which ever side - and has to argue it legally, he or she fights their corner on behalf of their client - and theri worth established in the process. The FOS offersa selective service symtomatic of Woolworths - " the pick and mix " service which allows the FOS to select which cases they will pursue - without giving any reason. That is nether logical nor reasonable - nor can it be considered as treating cusotemrs fairly. The FOS is hog tied by product providers and their strategies of " lobbying ", providing less than accurate information or misleading information - to assit them in their corrupt activities. Let the legal system do itheir job - and get rid of the FOS who play at being an ombudsman - and only create additional work and an assessment of whether there is a legal case - on behalf of product providers.

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Tony_Laverick

Jan 06, 2013 at 15:36

@Ian Lees

"The FOS is hog tied by product providers and their strategies of " lobbying ", providing less than accurate information or misleading information - to assit them in their corrupt activities.".?

I don't follow your accusations. Where is there any evidence of the FOS paying attention to lobbying or of not taking issue with misleading material?

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Tony_Laverick

Jan 06, 2013 at 15:58

@Rebus

Investors have never been at the mercy of the FOS since the process costs them nothing but time and they can still proceed to law if they do not get satisfaction.

Yes, some of the decisions are illogical but that is only a cost if you are an adviser bound to pay up by the FOS process.

I have no real issue with these bigger claims, especially if the money isn't suitably diversified nor limited by size or percentage. I am rather more fed up that greedy investors can make spurious claims without financial risk or recourse if they are thrown out. A single rejected claim may not cost the adviser anything, except time, but it increases the FOS costs which we all pay for.

Maybe the FOS should pass the names of the most spurious claimants to the Fraud Squad or CPS.

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Rebus Fortissimus

Jan 07, 2013 at 09:34

@Tony

You're dead right - if credible claims aren't at the heart of the process then the process will be as flawed towards the investor as it has been towards the manufacturer/distributor. Though I think it's fair that the investor does need some defending for a period in the light of what has transpired over the last decade. FOS introducing an arbitrary maximum has just spun the wheel another way.

It would be interesting to see if the SFO or CPS could handle a raft of these claims being passed their way given their current case load - maybe it would be good to get a couple on the radar. It's in all our interests in the industry to minimise bad practice and that action could make inroads - the mutually beneficial outcome is for investors investing with confidence and success.

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A Sheppard

Jan 08, 2013 at 17:05

I will watch this with interest as I think there will be many unintended consequences to this. If an IFA is forced to defend themselves in court following a decision by the FOS, surely it will be only just that the individual(s) from the FOS who reached their decision, are called to explain their reasoning to that court. That will then naturally lead to disclosure of the qualifications and experience of said FOS individual.

The FOS have been responsible for many strange decisions in the past and this judgement will undoubtedly shine a huge light on just how fit for purpose they actually are.

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Rebus Fortissimus

Jan 08, 2013 at 18:22

@A Sheppard

Yes - and the beauty of unintended consequences is that they can create opportunities as well as threats.

Two that strike me

1. HMRC et al will see there is a thread of action they need to follow through if they are to incentivise specific sector investment. Are they up or it?

2. There is market in the adviser community - post RDR even - for great advice on UCIS type products that deliver value with risk and do the job intended by HMRC. Now that would be novel.

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