FCA’s honest mistake angers advisers

The Complaints Commissioner concluded this week that the regulator’s register misled the public to think an adviser’s firm was suspended.

When an adviser who was unhappy with the way her firm was recorded on the Financial Conduct Authority’s register complained to the Complaints Commissioner the regulator was told to pay her more than £6,000.

Advisers would be more understanding about the FCA’s argument if they didn’t have to put their hands in their pockets every time they make any kind of error. Emma Ann Hughes

Rather than accept the commissioner’s conclusion, the FCA said it shouldn’t have to shell out large sums every time the register contains an honest mistake, especially if no financial loss can be proven to have taken place as a result of the error.

According to the complaint the FCA’s register displayed a former trading name of the firm.

The former firm was suspended and the register failed to make it clear the adviser’s new firm was no longer associated with it.

The complainant, who has not been identified, claims the average consumer would assume the new firm was suspended and decide not to do business with it.

Complaints Commissioner Antony Townsend agreed with the adviser saying the information was “misleading” and that a consumer would have had to look deeper into the entry to discover the suspended trading name was a former one.

Mr Townsend said: “While I accepted that the FCA entered the information on its register in good faith, the fact is that the way it was displayed was obviously misleading, and the FCA did not correct it despite being given two opportunities.”

Mr Townsend told the FCA to apologise for not having addressed the issue more quickly and pay £500 for the distress caused.

He also told the regulator to pay £5,839.29 in recognition of loss of business.

Rather than accept the request for compensation, in a statement the FCA said: “In a case where compensation might be appropriate, we would expect it to be shown that any financial loss ‘has directly resulted from the regulator’s error’ to use wording from the Commissioner’s published policy.

“A prospective client may well have paid more attention to these ‘status’ entries than to those under the ‘names’ column.

“The register holds hundreds of thousands of entries for firms and individuals. Robust processes have been designed to remove the risk of errors occurring.

“Correcting these matters should not, however, create an expectation that substantial compensation will be available where errors occur.”

In the comments section of our website, advisers were swift to reveal their anger at the Financial Conduct Authority’s refusal to accept the Complaints Commissioner’s request it compensate the advice firm.

One adviser asked “What is the difference between “an honest mistake” and plain incompetence? The consequences are the same. Perhaps advisers should try this one on with the Financial Ombudsman Service to see how far they get.”

John Phillips wrote: “Why is anyone surprised or shocked by this? I was at first surprised to read the FCA had been told to pay compensation to an adviser, as I thought they had no governing body, are above the law and are made of Teflon.”

As someone who feels sad about our increasingly “where there is blame there is a claim” culture, I think it is wrong that an honest mistake should result in a company being left seriously out of pocket.

But I also think, just because the regulator isn’t a private company, it shouldn’t be hit where it hurts – in the pocket – when it fails to deliver.

The problem with a call for compensation from the regulator is ultimately it is the industry - and their clients - that will end up paying for it.

Even if the “compensation” was deducted from the adviser’s regulatory fees bill, I fear the cost of doing this would be passed on to the rest of the industry – so you would be paying the bill for the mistake.

I started to think about what happens when you make an honest mistake in other occupations.

If you were found to have made an “honest” mistake in a shop – accidentally undercharging someone and therefore your till didn’t contain as much as it should have done - you could face having this amount taken out of your wages.

Why should your employer be out of pocket because of your incompetence?

If the register system is robust, as the regulator says in their response to the commissioner’s findings, then was it human error that led to the FCA twice failing to correct this misleading entry when it was pointed out to them?

If so, shouldn’t those humans see financial ramifications for their error or be given a warning?

I think advisers would be more understanding about the FCA’s argument if they didn’t have to put their hands in their pockets every time they make any kind of error.