Financial institutions can often leave us out of pocket by giving questionable advice or pushing us to make hazardous high-risk investments. Read this article to find out about the law which governs the behaviour of financial advisors and learn how compensation can be won if you are a victim of their misconduct.
You may be able to claim compensation if you have lost a substantial sum of money through an investment or by purchasing bonds.
Naturally an investor should recognize the vagaries of the financial markets and be aware of the risk involved before parting with any money, but there are cases when a financial advisor can be accused of incompetence in offering bad advice to the investor. Sometimes said advisors do not fill you in sufficiently on the finer details of the investment or they lure you into making a high-risk financial commitment by giving misleading advice.
There were reports in 2009 that financial institutions particularly preyed on elderly people who were more likely to be susceptible to being persuaded to take on risky investments. The people selling these packages are often paid commission and therefore have little regard for the financial security of the customer, as long as they can get a sale.
If you have lost a lot of money after being given questionable advice or being cajoled into a risky investment by a deceptive sales pitch then it could be considered an instance of mis-selling and you may be entitled to compensation if you find yourself in this predicament. Ask yourself if you would have made the purchase if you had been fully aware of all the details. If not, then you are likely to have a strong claim.
Financial Services and Markets Act (FSMA)
The Financial Services and Markets Act (FSMA) of 2000 decrees how all financial institutions must behave, and is chiefly interested in protecting the customer. The Act is enforced by the Financial Services Authority (FSA) by which every organization offering independent financial advice must be authorized.
It is a long and complicated document but essentially what it says is that financial institutions must conduct their business with integrity and due skill, care and diligence. It also states that they must give due consideration to the interests of their customers and treat them fairly. Furthermore, they are obliged by the Act to recognise the information needs of its customers, and communicate this information in a clear way and in no way misleading. This means they do not have licence to draw people in by sugarcoating the terms of their deals and concealing pernicious clauses.
If financial institutions do not conform to this code of conduct then they are liable to compensate their customers in full.
This is often the case in regard to the selling of investments and bonds and hundreds of millions of pounds have already been won back by those people to whom they were mis-sold. So there is no reason why taking legal action should frighten the living daylights out of you.
Read on to find out how to get your compensation if you believe a financial institution has not played by the rules when selling you a bond or investment.
How to claim
The first step towards securing your compensation is to write a letter to the offending financial institution. It is essential to ensure that your letter is adequately detailed – certain things you must include are details of the investment (i.e. how much was invested and which fund it was placed in), the date it was made and the name of the person who sold it to you, and the reason why you believe it was mis-sold to you, i.e. how the company has infringed upon the regulations set out by the FSMA. You should also cite the regulations of the FSMA which you believe are pertinent and argue why you think the company is in breach of them.
Many people succeed in claiming compensation this way – James was badly advised to play his money into an ISA account when saving for a wedding and ultimately lost hundreds of pounds, but won his money back plus interest after complaining persistently to the investment company.
But if, unlike James, you have no joy when complaining directly to the company, fear not because you can take your case free of charge to the Financial Ombudsman Service (FOS), which is a panel that acts on behalf of the FSA and looks into disputes between investors and financial institutions. When writing to them include all correspondence with the institution so far – in particular your initial approach to the company and their reply. The FOS has the authority to make the financial institution pay up if they find that any wrongdoing has occurred.
This route of appeal can also be fruitful. Barry’s parents were talked into placing a pension payout into a savings account by a financial advisor without being properly informed of the terms and conditions. They were compensated after Barry lodged a claim with the FOS on their behalf.
If you apply to the Ombudsman you will be given the contact details of a complaints officer who can update you on the progress of your claim.
Claiming from an insolvent company
Things can get sticky if you find out the financial institution that you are dealing with is no longer in operation. All is not lost, however, as the Financial Services Compensation Scheme (FSCS) exists to help wronged customers claim compensation if the institution through which they invested has since gone under.
The scheme provides a list of companies that are “in default” which are being dealt with by insolvency practitioners. Visit the FSCS to determine whether or not your institution is on this list.
If so then you should write to the insolvency practitioner in the same manner as you wrote to the financial institution initially. They may be able to use the remaining assets of the company to pay you off but if this is not possible then you should contact the FSCS directly. They oversee a fund which is used to compensate people who have suffered at the hands of rogue financial institutions who have ceased to exist. The FSCS is a non-profit organization that doesn’t charge for its services, so there’s no risk to take by inquiring with them.
The FSCS endeavours to resolve all its claims within six months.
Above all, refrain from concluding that a disastrous investment was your fault. Remember that it is the responsibility of the financial advisor to offer sound advice and not too put pressure on anybody to buy into an investment.
At Claims Financial we wish you the best of the luck with your claim, should you choose to make one.
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