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2.5.5 Contravention of the Rules is directly actionable through a Court of Law

While it may appear that, under the U.K. Financial Services Act 1986, the Self-Regulating Organisations (i.e. the PIA, LAUTRO and FIMBRA) controlled the judicial position in disputes with Financial Institutions, such is not the case.

The U.K. legislature inserted statutory provisions within the Financial Services Act 1986 that dispel any uneasy suspicion that the Financial Institutions and their Self-Regulating Organisations were intended to have it all to themselves, and ensured that a breach of any Rules or Regulations would constitute a cause of action for damages for the wronged party / consumer, directly, through to a Court of Law.


Under Section 62(1) of the Act, a contravention of any rules or regulations relating to the conduct of investment business under the Act ‘shall be actionable‘ at the suit of a person who suffers loss as a result of the contravention, subject to the defences and other incidents applying to actions for breach of statutory duty’.

Similarly, under Section 62(2) of the Act, actions for damages can be taken by a person who suffers loss as a result of ‘a contravention by a member of a recognised self-regulating organisation or a person certified by a recognised professional body of any rules of the organisation or body’.


BUT, neither the Securities and Investment Board, nor LAUTRO nor FIMBRA, nor the Personal Investment Authority, nor the Financial Services Authority, actively supported an awareness of these considerable powers among consumers generally.



Note!  While ignorance of his powers as an individual has always prevented the consumer from pursuing his rights of action under Common Law, the preventive purpose of Statute Law must be seen to have little effect if, by the opaque channels of its enforcement, the aggrieved consumer is kept equally ignorant of the recourse to justice it affords him.




The powers available to the aggrieved consumer under Section 62(2) of the U.K. Financial Services Act 1986 (or, equivalently, under Section 150 of the U.K. Financial Services and Markets Act 2000), whereby, actions for damages can be taken by a person who suffers loss as a result of ‘a contravention by a member of a recognised self-regulating organisation or a person certified by a recognised professional body of any rules of the organisation or body’, or as a result of a contravention by an authorised person of any FSA Rule, can only be truly seen in light of KNOWLEDGE of the specific provisions of those Rules.


To that end, the pertinent specifics of the LAUTRO and FIMBRA Rules are set out in the Appendix 2/1. These Rules became the adopted core of the PIA Rules and, subsequently, of the current FSA Rules.


Note!  You will recall that, at the outset of Section 2.4, we highlighted the fact that the specific provisions of Statute Law must be seen as drawing into focus a legal interpretation of what would instance a breach of Common Law precedent.

  • The entirety of the Principles, as defined in Schedule 8 of the U.K. Financial Services Act 1986, are a codification of precedents already set within U.K. Common Law. (See Section 2.5.1.)
  • The Securities and Investments Board (SIB) introduced the Financial Services Conduct of Business Rules in accordance with the Principles defined in Schedule 8 of the U.K. Financial Services Act 1986. (See Section 2.5.2.)
  • The LAUTRO and FIMBRA Conduct of Business Rules were duly altered to conform with the Financial Services Conduct of Business Rules as introduced by the SIB. (See Section 2.5.3.)
  • The Personal Investment Authority Rules were subsequently (in 1995) adopted from the LAUTRO and FIMBRA Conduct of Business Rules. (Remember the PIA was under the direct authority of the FSA.) (See Section 2.5.4.)
  • The Schedule 8 conforming elements of the LAUTRO and FIMBRA Rules, as adopted by the PIA, have been further fortified within the current FSA Rules ─ under power of the U.K. Financial Services and Markets Act 2000.

    Therefore, the Schedule 8 conforming elements of the LAUTRO and FIMBRA Conduct of Business Rules, have specific relevance to all consumers (regardless of time-frame) taking an action against a Financial Services Institution, in that they provide specific instances, codified under power of Statute, of what constitutes a breach of Common Law.

(See  Appendix 2/1: LAUTRO and FIMBRA Conduct of Business Rules.)




The 1995 PIA Rules required that, when being sold an investment product, the consumer be provided with a Key Features document setting out the fees and charges being levied and how these fees and charges affect the return on your savings.

Again, this Key Features document was similar to the ‘Product Particulars’ documents as previously required under the LAUTRO and FIMBRA Rules. (See Appendix 2/1: LAUTRO and FIMBRA Conduct of Business Rules.)

Subsequent PIA Rules (and the current FSA Rules) also required that further specific information be provided to the consumer, such as: the inclusion of ‘Health Warnings’, and the provision of a written ratification of the ‘Reason Why’ a client is being advised to choose a particular investment option.




Note!  The current position (since 1st December 2001) is that the consumer can refer a matter of dispute to a wholly independent expert authority set up by the FSA under power of the Financial Services and Markets Act 2000: the Financial Ombudsman Service. (The Financial Ombudsman Service will be discussed further in the following Section.) Also, as with its predecessor Act, under Section 150 of the Financial Services and Markets Act 2000, a contravention by an authorised person of an FSA Rule is actionable for damages, directly, through a Court of Law.

 

 

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