<
p>Three IFA firms have dragged an industry watchdog to court.
The claims made against Financial Ombudsman Service (FOS) by three IFAs have been dismissed in court.
Mrs Justice Thirlwall was satisfied that there were no errors of law by the ombudsmen after Westscott Financial Services, CBHC LLP and DTE Risk and Financial Management wanted a judicial review after ombudsman upheld a complaint against them from former clients.
The five complaints to the FOS arose out of the recommendations the IFAs had made to clients. The financial products in question were marketed and distributed between July 2005 and April 2009 by Keydata Investment Services Ltd. It was said in the judgement that another 32 complaints are yet to be determined.
In June 2009 Keydata was placed in administration due to some products not qualifying for ISA status.
A large number of investors lost money and many claimed on the Financial Services Compensation Scheme (FSCS) which has so far paid out over £300 million. The investors’ claims against IFAs were sent to the FSCS and proceedings began against a large number of the firms in 2011.
Individual complaints made in accordance to the rules by the investors about the IFAs to the FOS. It was found that the products posed a ‘significant risk’ which would not have been suitable for “all but the most experienced of retail investors”. The total compensation ordered in these cases was £362,000.
Bond Dickinson, on behalf of Westscott and on behalf of DTE, wrote to FOS in respect to the complaints made by the investors where five points were raised.
Firstly, that the decision had been reached with the benefit of hindsight. Secondly, that Keydata investor claims were currently subject to complex litigation in the Commercial Court and they have yet to give their verdict.
Also, the statement identifying Keydata products as high risk will be determined to be an incorrect.
Vikram Sachdeva representing the IFAs said: "that FOS's decisions contain a number of errors of principle, each of which renders the decisions flawed in law.”
He pointed to their failure to appreciate the FSCS litigation and submitted additionally that these claims involved human rights of the claimants namely the right to peaceful enjoyment of possessions protected by Article 1.
Jonathan Moffett, representing FOS, submitted that these claims are challenges to the rationality of the decisions. He also said there were no errors in law and there was no irrationality.
Also he submitted that there was no requirement for a higher level of scrutiny than usual.
Mrs Justice Thirlwall was satisfied that the FOS understood the basis upon which the applications for the stays were made and she was unable to identify any errors made in their approach.
She stated there were no errors of law and the decisions were not irrational, therefore the claims were dismissed.
Three IFA firms have dragged an industry watchdog to court.
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