FOS could double client redress fine limit to £200,000
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The Financial Ombudsman Service may double the amount it can make a firm pay in client redress to £200,000, warns City law firm Reynolds Porter Chamberlain LLP.
RPC says that the Financial Services Authority recently contacted several financial services firms to see how much redress they have been paying through FOS and court awards in the past year.
Its findings suggest the FSA is likely to increase FOS’ maximum award from £100,000 to £150,000 or even £200,000.
Jonathan Davies, partner at RPC, says: “This hike would put many IFAs at risk of closure. In the past they have found it hard to get professional indemnity cover and a big rise in awards could make it even tougher.”
The FSA requires firms to hold PI insurance including cover for FOS awards. But insurance firms may be reluctant to provide cover for large awards by the FOS.
RPC says that under UK law, claims handled by the FOS are not subject to a maximum time limit so this change could expose IFAs to big claims from activities that took place more than 15 years ago.
