Interest reipublicae ut sit finis litium – it is in the interests of the people that there be a (time) limit to litigation – was one of the founding rules of Roman law.
Nearly 3000 years later that principle retains great resonance yet remains to be incorporated into the world of financial services.
Since the inception of RDR advisers have risen to the challenge. They have passed the exams, reinvented their businesses where necessary and constantly strive to ensure that the best outcomes are achieved for consumers.
In return the FCA remains determinedly non-committal when asked to address the current unfairness regarding liability when compared to other professions.
The Limitation Act 1980 restricts the time within which a person can bring a claim against an individual or company who they believe has committed a criminal or civil wrong against them. The normal limitation period is six years, or three years after the date of discovery of the material facts. The second period is allowed subject to a long-stop provision that no claim can be brought after 15 years since the original advice.
Despite a mounting campaign no such buffer exists to offer similar protection to financial advisers.
While fairness to consumers is one of the core FCA tenets, there must come a point where the responsibility shifts and caveat emptor appliesAccountants, bankers, chartered surveyors and solicitors are prominent among those afforded such rudimentary protection. Financial advisers meanwhile remain open to action without any time constraint whatsoever. It is punitive, irrational and unjust – and it is time the playing field was levelled.
For many years now providers have issued plain English annual statements, backed by a dedicated customer service provision and a host of other initiatives to keep consumers updated. It therefore seems increasing unlikely that a consumer could be ill-informed about a product or investment that has been held for more than 15 years.
While there is no doubt that fairness to consumers is one of the core FCA tenets, there must come a point where the responsibility shifts and caveat emptor applies.
Despite the Financial Services and Markets Act 2000 seemingly stipulating that the FCA must follow this limitation, it has not done so.
Instead subordinate legislation of the FCA rules permits the Financial Ombudsman Service to allow a claim if it is considered it fair and reasonable, without any long-stop restriction.
When parliament debated the Act there was no mention of the removal of the long-stop provision for financial advisers despite the Act stipulating that any departure requires justification (the parameters for which are clearly defined).
Separately the Law Commission stated that any reform of limitation rules should balance the interests of the defendant and plaintiff.
The justification Fos gives for its departure from the normal rule is that financial products are “intangible” and can be of a very long-term nature. That, it claims, creates a need for greater protection of consumers than is ordinarily granted.
Such a policy completely ignores the fact that countless other professions that provide advice, where the damage can lie undiscovered for more than 15 years, are able to operate without such a threat hanging over them.
How can advisers reasonably be expected to hold records of every conversation and document from the first to last advice ever given? It is simply untenable that they are expected to indefinitely underwrite advice provided on a transactional basis in the past.
Despite the FCA arguing that it is “not in the interests of the consumer” to bring in a long-stop, that is not an acceptable reason for departing from the rules of the Limitation Act which stipulates that justifications for general limitation periods cannot be distinguished.
The situation we find ourselves in is patently unfair on financial advisers. No other profession is being penalised in such a selective, unjustifiable manner.
Paradoxically it is eminently unfair on claimants too. Will they not be less encouraged to get material facts on products provided by financial advisers in the knowledge that they can always bring a claim if it goes wrong?
Lord Flight raised the long-stop issue in the House of Lords in December 2012 but his proposals were rejected by Labour peers. They ruled that financial advisers should take “full and appropriate care” to ensure that their advice was sound and should therefore not be afraid of not having a limitation period.
Since the latest reshuffle in the regulation of financial services, there is a possibility the case for a long-stop may be pushed into the background. This cannot be allowed to happen.
I fully support the renewed lobbying campaign by the Association of Professional Financial Advisers and we will be canvassing our advisers for their views on the possibility of setting up an e-petition to be lodged with the government.
If our industry is to survive and thrive we must be afforded the same level of legal protection as other professions.
Helen Turner is distribution and development director of Tenet
You Said:
michael949 in response to Jeff Prestridge’s column on buy-to-let (FA, 13 June)
This is a very good article on buy-to-let. As an IFA and buy-to-let investor the main issue I have seen with residential buy-to-let over 15 years is stock-picking; this is critical for future gains. The rental yields are important but at some point in time you will want to sell.
