IFAs in danger of losing PI insurance, warn lawyers

Lawyers recently warned that any IFAs who have aided in the completion of compensation scheme forms for clients that have an investment in Keydata may find themselves lacking PI insurance if claims arise in the future from those clients.

The Financial Services Compensation Scheme recently confirmed last September that Lifemark-backed Keydata products have eligibility in regards to compensatory measures.  Despite this determination, such investors will not have any solid figures until the end of the current month, and still have to go through the application process for the funds.

While many investors relied on their IFAs for aid in filling in many of the forms, law firm Mills & Reeve recently supplied guidance to the industry, stating that IFAs that provided advice to investors in how to fill out the FSCS forms now run the risk of losing any professional liability insurance they may have due to the fact that the legal rights of their investors have been affected.

The lawyers issued a warning to IFAs, stating that if investors have been affected and this leads to a claim arising, their current business insurance may not cover the claim as a result.

The law firm added that IFAs will without a doubt face an increase in claims through the courts and the Financial Ombudsman Service if the FSCS fails to compensate any of their investor clients, stating that any risks presumptively created in regards to the IFA not being in compliance with the rules of the FSA is something that must be considered carefully, as this could increase the difficulty of defending claims that arise in the future.

The law firm further warned that any IFA that receives more than one allegations in regards to mis-selling will most likely be subject to an arrangement that will be reciprocated by the FOS, the FSA, and the FSCS in turn.

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