Longstop matters – who cares

I exchanged some tweets, phone calls and e-mails over the last few days regarding the e-petition for Fair Liability for Financial Advice –http://epetitions.direct.gov.uk/petitions/52958.

This is an excellent initiative started by Helen Turner at Tenet, an initiative that really deserves support. But, the e-peitition expires on the 23rd July and I am very concerned that only 6,402 have signed this at the time of writing. Helen’s target is 10,000.

It may be that RDR has dulled adviser sensibilities but for goodness sake, when will the realisation dawn that the continual refusal to reinstate the longstop by the FSA and the current FCA position of ‘willing to discuss’ will probably see the same ‘outcome’. No longstop in place.

APFA is keen to be seen as having succeeded in getting the FCA to conduct a review of the longstop but many advisers would see this as too little, way, way too late. Additionally,those in APFA leading this campaign need to have a rethink about strategy and unless you advisers start ‘stamping your feet’ in greater numbers, nothing will ever get done.

I think regulator attitudes over many years and from many regulators has confirmed that with 20% plus reductions in the adviser community, linked to very poor trade body leadership over many years, a singularly consistent willingness to ‘capitulate’ on the longstop and other key issues by successive APFA and AIFA leaders, regulators past and present see advisers as weak.

And with a weight of a regulatory induced loss of trust seeing public opinion supporting the concept that anyone in financial services is a ‘villain’, they can ride roughshod over a decent group of highly regulated people concerned about their livliehood and future security, especially in retirement.

APFA have a meeting with the FCA soon on the longstop. Despite earlier reports to the contrary, Alan Lakey (the only APFA council member with actual detailed knowledge, understanding and experience of fighting the longstop) has now been invited by APFA to attend that meeting however we do not of course encourage blows to be exchanged.

Such a meeting is a good sign in some ways, but given that the definition of a pessimist is simply a well-informed optimist, I would take the view that the result will be a reworking of old arguments. That is that unless the reinstatement of the longstop can be proven to have no consumer detriment…well you know the rest.

There is a sense amongst many advisers that by simply being a limited liability company or partnership this provides protection from stale claims. I would suggest that advisers think again. A substantial stale claim, or a number of them, if successful can put your limited liability company out of business. And given that ‘phoenixing’ is a thing of the past, and the FSA and now FCA see liability and responsibility falling upon controlling individuals in certain instances, you should, in ‘Hector speak’ be very afraid.

The point is clear about the longstop, in fact follow this link –http://www.panaceaadviser.com/main/p20.php?cx=014967606690113664965%3Aghrmkhjba3a&ie=UTF-8&q=longstop&search=go- and you can see how much involvement we have had in the campaign to reinstate.

The Limitations Act should apply to all citizens in this country, not an ’Animal Farm‘ version. And only Parliament can act to either impose or remove protection from the law. In not referring to a removal in FSMA 2000, Parliament did not remove it, as the regulator would suggest it did.

Barrister Peter Hamilton summed up the whole lack of longstop position very well as follows: “Thus, under the law, I know in advance where I can and cannot park my car. But if I could park only where some official specified after the event, I would have no right to park at all. Similarly, if my right to my possessions is watered down to mean only a right to hold them until the FOS decides it is fair and reasonable for me to pay them to somebody else, then I have no ‘right’ in a true sense to my possessions at all. This conclusion is reinforced by the fact that there is no appeal and the fact that any judicial review of a FOS decision on the merits of a case is, for all practical purposes, impossible because of the vagueness of the subjective (‘in the opinion of the ombudsman‘) fair and reasonable criterion”.

The e-petition needs 100,000 votes to get a debate in Parliament, which is unlikely however 10,000 would be noisy. In addition to a successful judicial review being granted or a case going to the European courts, this is your opportunity to begin the fight back.

Sign now, or as they say, forever hold your peace…and suffer the consequences.


FSCS, Data Protection and the Longstop

Advisers may be concerned to know about the recent FSCS handling of personal data when claims are received, the adviser has retired and the firm in question was NOT in default of the scheme.

When a ‘consumer’ approaches the FSCS (looking to claim compensation) and the firm from whom advice was obtained is no longer trading (as the adviser has retired) they are, if requested by the ‘consumer’, releasing information as to the whereabouts of that now retired adviser, even if the firm is not in default.

In correspondence seen, the FSCS is implying that it has the right to release such data when requested; quoting guidance it says it has from the Information Commissioners office (ICO).

This they say states that “ Where the FSCS has rejected a claim for solvency reasons (firm not in default) and the consumer wishes to pursue a claim, disclosure is permitted under the Data Protection Act 1998.

They go on to refer to the fact that they have received guidance from the ICO to that effect- providing this summary. 

Now here is the situation, and advisers should rightly be incensed as this could happen to anyone and illustrates only too well the need for a longstop to be reinstated:

The date of the advice (relating in this case to an endowment mortgage) was 1989, some 25 years ago

If the FSCS did accept the complaint, it would be dismissed as they do recognise the longstop.

The advisory firm- a partnership, closed in a correct way in 1998 with full PIA regulatory approval and it is not in FSCS default.

The adviser made it clear that he did not wish his address to be given and he gave some specific, valid reasons.

These reasons were dismissed by the FSCS.

The adviser told the FSCS that he would complain to the ICO as he felt it was unfair to release his details when the firm was not in default and that the complaint would have been dismissed under FIMBRA, PIA and FSA rules as well as the FSCS own rules by way of being out of time on so many levels, including their own application of a longstop.

The ICO investigated the complaint and remarked that the application of ICO guidance by the FCSC did not seem to be in accordance with what they deemed to be a reasonable interpretation of the Data Protection Act 1998 and the many updates applied since.

In addition they commented that a release of data such as requested would be “legitimate” only if the firm was still trading and that the business address was also the advisers home address.

The ICO case officer stated: “Thank you for raising your concern with us about the Financial Services Compensation Scheme Limited (FSCS) handling of your personal data. 
You are concerned that FSCS want to disclose your personal details to xxxxxxxx. 

It is our view that information about a sole trader or partner is likely to be personal data relating to that sole trader or partner; however, we accept that personal data relating to someone acting in a business capacity is less private than information relating to an individual’s home life. 

Where a sole trader’s personal data is released in the context of a business relationship the disclosure is unlikely to involve a breach of the first data protection principle. 

In addition, there are exemptions within the DPA that will allow the disclosure of personal data, specifically section 35(2) which states: 
“Personal data are exempt from the non-disclosure provisions where the disclosure is necessary  

  1. a.             for the purpose of, or in connection with, any legal proceedings (including prospective legal proceedings), or 
  1. b.             for the purpose of obtaining legal advice or is otherwise necessary for the purposes of establishing, exercising or defending legal rights. 

It is important to note that an organisation (FSCS) does not have to disclose personal data in response to a request from a third party simply because this exemption applies, unless obliged to do so under a court order. 

An organisation (FSCS) can choose whether or not to apply the exemption to make a disclosure, and it should do so only if it is satisfied that the disclosure would fall within the scope of the exemption. 

When deciding whether to disclose an individual’s personal data an organisation (FSCS) should also consider the first data protection principle which requires an organisation to process personal data fairly and lawfully. 

To assess whether or not personal data is processed fairly, an organisation should consider how it affects the interests of the people concerned.

Personal data may sometimes be used in a manner that causes some detriment to an individual without this necessarily being unfair. What matters is whether or not such detriment is justified. 

If FSCS were to disclose your details to xxxxxxx it would, in my opinion, be unfair. 

The ICO adjudication casts very severe doubts on the correctness of the statement made by the FSCS in justifying data release to a claimant.

Saying it can release data because “considerable weight has to be given to the legitimate interests of the customer” in this case was clearly wrong and unfair, the adviser has rights too!

We hope this decision by the ICO will put a stop to such bad practice and allow decent retired advisers with unblemished records to enjoy what is left of their lives free from worry or distress.

And going forward ensuring that those yet to retire enjoy the same protection that the Data Protection Act 1998 affords to all even if the Limitations Act does not.