FCA to consult on long-stop for advisers

The FCA is to consult on the introduction of a 15-year long-stop for financial advisers as part of the Financial Advice Market Review.

In a consultation paper on the FAMR jointly published by the FCA and the Treasury today, the regulator says it will evaluate the options around implementing a long-stop.

The FCA says it will consider the following options: maintaining the current regime, introducing a long-stop, introducing varied limitation periods linked to the terms of products, strengthening professional indemnity insurance, and setting up a compensation fund.

It says the long-stop could be for 15 years, or “a different time period recognising the long life of financial services products”.

The compensation fund would pay out in the event of a justified claim older than 15 years against an individual firm, which all firms would contribute to. However, unlike the Financial Services Compensation Scheme, the fund would not require the firm to be insolvent before paying out.

The regulator said it would consider the case for a 15-year long stop on complaints to the Financial Ombudsman Service in its 2014/15 business plan, published in March 2014.

Talks were delayed after the FCA pointed to an EU directive as a barrier to progress. But in December the regulator confirmed the directive would not stand in the way of a long-stop.