Advisers should review data security: law firm
Financial advisers should urgently review data protection procedures to avoid compensation claims following a recent court ruling, a specialist has claimed.
John Warchus, partner at commercial and technology law firm Moore Blatch, called on advisers to strengthen procedures in the wake of the Google Inc v Vidal-Hall case, where the court of appeal clarified rules under the Data Protection Act 1988.
According to the court, clause 13 of the Act will now be interpreted so that financial loss no longer needs to be shown for a compensation claim relating to emotional impact on the claimant.
Mr Warchus said: “Brokers, or indeed anyone in control of data, will now have an even stronger incentive to comply with data protection rules.
“Brokers should urgently review their data protection procedures and strengthen where necessary as more compensation claims are likely and the amount of damages awarded is also likely to increase.”
He claimed the court ruling could lead to an increase in claims for compensation under clause 13 and a likely rise in class actions where many individuals have suffered emotional distress or an invasion of privacy because of the same data breach.
An FCA spokesman referred to the regulator’s 81-page document, Financial crime: A Guide for Firms. Part 1: A Firm’s Guide to Preventing Financial Crime.
In a section about governance and data security, the watchdog notes that in an example of good practice, a firm could have a clear figurehead championing data security, clear plans to respond to data loss that include notifying customers affected by this and a practice of monitoring accounts following a data loss, to spot unusual transactions.
It added: “Information must be kept secure because consumers can be vulnerable and criminals can use it to commit offences such as identity theft.”
Chris Hannant, director general of Apfa, said: “Advisers need to take care with people’s data because it is an increasingly sensitive issue. They have to look after the data but they also have to make sure they get rid of it (later on).”
A Chartered Insurance Institute spokesman said the issue was not one for the body to comment on.
Adviser view
Joe Farrell, managing director of Glasgow-based Farrell Financial Planning, said: “Data protection is an area where advisers just try to follow the rules. My understanding is that as long as an adviser backs up the data with a reputable firm, they should be okay.”
