A lawyer has disputed claims the Financial Ombudsman Service made inconsistent decisions over the liability of networks and their appointed representatives.
Robert Morris, a partner at law firm RPC, disagreed with a trainee solicitor at Regulatory Legal Solicitors who accused the ombudsman of making “arbitrary” decisions over networks being held responsible for advice given by their appointed representatives.
In the article published last month, Regulatory Legal’s Tobias Haynes pointed to the Financial Services and Markets Act (FSMA) which states: “The principal of an appointed representative, is responsible to the same extent, as if he had permitted it”.
However, RPC’s Mr Morris said it was important to highlight the act also states that a network is only responsible for “anything done [...] by the representative in carrying on the business for which [the firm] has accepted responsibility”.
In other words, Mr Morris said the act stated the network is not responsible where the appointed representative has acted outside the scope of the agreement.
Mr Morris said: “A network would be pretty unwilling or unlikely to accept carte blanche responsibility without any limitation,” suggesting that would be a “pretty unattractive” business proposition.
“It seems like Regulatory Legal were saying they liked their decisions previously, but not recently.
“The Fos often gets accused of inconsistency and I’m not sure that is always fair.
The Fos often gets accused of inconsistency and I’m not sure that is always fair. Robert Morris“You have to treat each case on its own facts, so it is often very difficult to say one case is identical to another.
“I think it can be quite misleading to go back and look for patterns.”
Another point Mr Morris made was that a rejection of a complaint by the Fos does not necessarily mean a consumer cannot seek recourse against the appointed representative in civil law.
“The individual is almost given a second bite of the cherry by being able to bring a claim against the network through the Fos, but only if the advice given was within the scope of the AR’s authority.”
A provider-owned network, which wished to remain anonymous, stated it is impossible to say whether one or other of the lawyers is correct, because similar cases have been judged in different ways by the ombudsman.
A spokesman from that network said it comes down to the ombudsman involved, adding there is a legally uncertain “grey area” where an AR operates from premises owned by a network.
He said: “If an AR advises on products outside the scope of the contract on the network premises, and a client reasonably expected they were dealing with somebody operating within the confines of their contract, then they could make a reasonable case that the network hadn’t done enough to ensure the adviser was operating as they should be.”
The spokesman for the network said this was a “substantial issue” that raises a lot of uncertainty, because it is not clear how certain cases will be judged.
He said: “Effectively it introduces risk for everyone in the network, because paying out a Fos complaint increases the cost to all of the members.”
The network agreed with Regulatory Legal’s claim that there is a lot of inconsistency at the Fos, with adjudicators making differing decisions on identical cases.
“The reason is the Fos is not governed by any burden of proof or legal standards that would apply in court,” added the spokesperson.
When asked for a response to the network and Mr Morris’ comments a Fos spokeswoman said it would be “inappropriate” to comment.
katherine.denham@ft.com
