In reference to the news that Tavistock Financial is chasing former appointed representatives of Financial Ltd for professional indemnity excesses, in my opinion, it would appear as though former FL Advisers and ARs are in a difficult position on this one.
Their “get out of jail free card” would have been obtained had FL been liquidated already. However, it appears that this has not happened as yet.
Reading the allegations made by some of the advisers, it is clear that they – the advisers in question – are not conversant with Financial Services Authority/Financial Conduct Authority rules and process once a skilled persons review has been imposed on a firm – FL in this case. FL and Tavistock have to follow, to the letter, whatever rules the regulator imposes on them and that usually includes cutting advisers out of the loop of communication with clients. They even have to approve all letters the firm proposes to send to clients included in the past business review process. Although this might sound unfair to the advisers, sadly this is how it is.
Ultimately, the advisers’ liability for PI policy excesses are determined by what the contract of agency between themselves and FL stipulates. So if the regulator has truly granted Tavistock the exemption not to be responsible for past advice liabilities, and also not allowed FL to be liquidated swiftly, then it is difficult to see how the former advisers can escape the liability of paying PI policy excesses that applies to business transacted by them.
Ultimately, someone has to take the hit. It could have been Tavistock, but they appear to have negotiated their way out of it, or it could have been FL’s PI insurer, but I can not see them being that generous.
It could have been FL liquidator from the assets of the FL, or it could be industry-wide advisers via the Financial Services Compensation Scheme. Or it could be the former FL advisers who transacted the business. From what I can see here, it would be difficult for the latter to escape this one. This could put a fair few of them out of business, but the risk does come with the territory.
Head of regulatory matters
VN Direct, Aylsford, Kent