News & Views

The FOS ate my hamster!

Regulatory comment for Financial Advisers and Paraplanners

6 Jun 2019

The FOS ate my hamster!

Please excuse the dramatic headline, but desperate times call for desperate headlines and we are certainly in desperate times.

The popular myth that FOS claims only happen to “bad “advisers hides a real and present danger. Every adviser has been issued with a perpetual ticket in the Reverse Lottery run by FOS. 

In this game, not getting the winning number is a good thing.  However, just because you have managed to conduct your business without a claim so far does not mean that you will get to draw the wrong ticket in the next draw. 

Most of the advisers now seeking my help with FOS claims (and there are an alarming amount of them coming through) start their correspondence with “I have never had a claim before but…”

This article is important because unless we can change the way FOS operates, the lottery will continue and – with the end of the PPI lottery – advisers stand lose their businesses and their homes – and the impartial advice sector will not be able to expand.

Last week, Libertatem organised a meeting of The Resolution Party in London. Currently it includes, a top barrister who concentrates on dispute resolution, a London solicitor, IFAs, compliance firms and trade associations to discuss the options that might be explored, particularly for the larger FOS claims.

The view around the room was that the operation of FOS was already out of hand before its limit was increased from £150,000 to £350,000. It did not have the methodology to render consistent judgements. Neither did it have the expertise to resolve large cases, despite its claims to be improving on the quality and experience of its staff.

Let’s face it – FOS has been operational for nearly 20 years in its present form. If it hasn’t gathered the expertise by now, it never will. Whilst having a better quality of staff would be an improvement; it is the way FOS approaches cases that is the big issue.

FOS claims that it seeks a “fair” resolution between the client and the adviser. But the reality is FOS’s default position which, in too many cases, is to find a way for the client to get a payout, regardless of circumstances. 

In this they can claim that they are allowed to do so by the FSMA 2000. Whilst this approach may have some value in resolving small claims of a PPI nature, it simply cannot be the basis of claims for £350,000.

The Resolution Party is seeking to create a new way of resolving larger complaints. One option is to create a Tribunal system which would have access to real expertise not least because of one of the three sitting would an adviser. A legal beagle and a consumer rep would make up the other two. This would be cheaper than taking the case to the High Court; which is where cases of this size are usually decided.

So, what is wrong with this approach? After all we believe that the Treasury Select Committee likes the idea and many members of the FCA’s own staff are fully aware of FOS and its weaknesses.

The antis are drawn from the dark corners of the Treasury, the banks and some in the regulatory empire. There's no doubt that the current modus operandi of FOS suits the Treasury. Because it does not identify particular cases, the Treasury can use FOS to bury government failures such as LIBOR, Pensions Freedoms and Equitable Life. 

Plus it also can change its opinion at will to cover regulatory failures. In the Connaught case, FOS decided to save regulatory blushes by declaring that all claimants were not “sophisticated clients”. In another case it decided all claimants were “sophisticated clients” because that time it suited their cause.

The banks do not like the tribunal approach because it is public and therefore the cases are on the record, but also because it views FOS as a “friend”. Indeed, even Channel 4's Dispatches programme claimed that banking clients were put at a disadvantage by FOS. Finally, the Empire objects as it does not want anything it does not control and cannot grow.

These negative opinions are the very reason we should continue. The current system has deliberately obtuse line of command and responsibility.

The Treasury can claim the Empire is an independent body when it suits but direct it behind closed doors when it needs to. The FCA can issue rules by the van load but take to no responsibility for their effect as FOS does not need to take account of them in its judgements.

The result of this fog is a sloppy system. Politicians can come up with daft policies such as Pension Freedoms on the back of a fag packet and dump the practical application on the Empire who in turn dumps it on the advisers. 

Sloppy policy

Sloppy regulation leads to known rogues being allowed to become regulated and enforcement failing to police the boundaries properly.

Why does it take five years to work out that peer to peer lending is going to cause problems? Why did it fail to respond to Neil Liversidge when he blew the whistle on London Capital & Finance 4 years ago? Simply because FOS can be depended upon to dig sloppy regulators out of the mire leaving the rest of us to pay for the damage created.

When I saw the Tribunal idea, I thought it was a better way of resolving claims. It may also give is a better way to regulate.

The Resolution Party has been created to bring about much needed change in the way FOS operates, and the initial signs are positive.  Alas, all of this effort requires money. Join Libertatem today and help us make it happen. 

If you want to get involved, join Libertatem by clicking on the link below.  Membership starts at just £20 per month.  If you would like to donate, you can do so via Paypal –

Join Libertatem now – from just £20 per month

Email this article Print Share on Twitter Share on LinkedIn Share on Facebook Share on Google+


Not yet registered?

Please complete this form to join our community

Select your role:
Confirm Password



Join the Panacea community

Join the Panacea community for free and recieve news, guides, whitepapers, event information, special offers and more!