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No right to a second bite at the cherry when claiming for financial adviser negligence

Author headshot image Posted by , Senior Associate

The Court of Appeal rules that consumers cannot accept an award for losses from the FOS and then sue their adviser in cases of financial adviser negligence.

The decision in Clark v In Focus Asset Management means that complainants to the Financial Ombudsman Service (FOS) cannot accept an award and then seek to recover the balance of their losses by bringing a civil claim in the courts against financial adviser negligence.

As with a number of professional industries, including financial and legal services, consumers have the right to bring a complaint to the relevant Ombudsman about their financial adviser’s negligence. Complaining to the Ombudsman is free and is often an effective way of resolving disputes between consumers and their professional advisers.

Complainants to the FOS can receive up to £150,000 in compensation, but what happens if the consumer’s losses exceed this cap?

Background to the case

In 2008 Mr and Mrs Clark sought investment advice from In Focus Asset Management and subsequently invested the proceeds of the sale of their family business into a geared traded endowment plan. Two years later the portfolio had lost £500,000 in value and they complained about the advice they had received to the FOS. Their complaint was successful and In Focus paid out £100,000 in compensation (the maximum the FOS could enforce at the time). Mr and Mrs Clark then issued High Court proceedings against InFocus for the balance of their losses.

The judgement

In the judgment, handed down on 14 February 2014, the Court of Appeal held that it is not possible to accept an award from the FOS and then litigate the same case of financial adviser negligence in court. This is based on a legal principle which prevents matters that have already been “determined” by a court or tribunal being determined again.

There may however be some cases where separate proceedings are permitted after accepting compensation from the FOS. This would be limited to cases where the substance or facts of the court claim is different to the complaint made to the FOS.

How can this affect your claim for financial adviser negligence?

Investors who have lost sums in excess of the £150,000 limit should seek prompt legal advice on their potential professional negligence claim. The Professional Negligence Team have experience of dealing with significant investment losses arising from financial adviser negligence, including failing to advise on appropriate investments or advising inexperienced investors to invest in unsuitable high-risk investments.  If you think you might have a claim contact us today.

Photo caption: Simo ubuntu

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