A legal battle between a network and one of its former financial advisers could impact compliance regimes industry-wide, a lawyer has warned, bringing in more stringent approaches for checking investments.
FTAdviser revealed last month, advice firm Ian Gray & Associates is suing Investments Ltd for a million pounds of losses, after the network banned a discretionary investment and pension service set up by the adviser for being too high risk, despite it having previously passed the network’s compliance regime.
Robert Gray, director of Ian Gray & Associates, is arguing Investments Ltd should not have permitted him to set up the service in the first place in 2008, if it was not compliant with the network’s criteria.
Chris Finney, who heads up the financial services team at law firm Cooley, where he is a partner, said the Ian Gray & Associates case should serve as a warning to other networks and advisers.
Depending on the outcome, it could lead to the Financial Conduct Authority suspending, fining or putting a complete ban on carrying out particular activities for all firms engaged in similar arrangements, he said.
“The FCA will regard the outcome of this case as a wake-up call for principals to better check they know exactly what’s going on, rather than wait for the regulator or a claimant to complain,” he said.
David Carrington, sales and marketing director for network Personal Touch, suggested in general the network model is now much more controlled and adopts higher levels of compliance than in previous years.
“Over the past four to five years the quality standards have risen,” he said, adding now any problematic investment services would be caught in the compliance net.
Mr Carrington said while Personal Touch takes a sample of cases considered to be low-risk, he emphasised all cases with a high level of risk are looked at in detail.
“We reflect the quality of the advice in the fees advisers pay us,” he said, meaning those advisers whose recommendations pass compliance without challenge pay lower fees than those where problems are found.
“We have used the pricing model as a way of creating that cultural change.”
katherine.denham@ft.com
