Financial Services and Markets Appendices to the Minutes of Evidence


Memorandum by the Confederation of Insurance Trade Unions

  We note that the Joint Committee's enquiry is focusing on the issue of discipline, enforcement and the tribunal. We wish to bring to the attention of the Committee the way in which the financial services industry is interpreting the regulation of references for financial advisers which has unfairly excluded a number of our members from the industry over the last few years.

  The PIA's rules require that employers provide a reference on a member of a firm's investment staff to another regulated firm of all matters which the firm has reasonable grounds for believing to be relevant and true. This includes whether or not an individual has been the subject of a complaint.

  In practice the basis of a complaint may relate to the performance, or administration of a product rather than to the advice or conduct of the financial adviser during the sales process.

  Even complaints which are not up-held are recorded as part of the financial adviser's reference and our experience is that such complaints can prevent our members from gaining new employment.

  We have raised this matter in our recent submission to the FSA and HM Treasury as part of the Government's consultation exercise. Furthermore we have raised our concerns in meetings with the PIA who have expressed the view that this is an issue for employers rather than for the regulator.

  In response to our earlier attempts to raise this matter with the PIA they wrote that:

    PIA's rules require that a reference provided on a member of a firm's investment staff to another regulated firm, or to an appointed representative firm should make full and frank disclosure of all matters which the firm has reasonable grounds for believing to be relevant and true.

    Whether or not an individual has been subject of a complaint (as defined in PIA's rules) will be a matter of fact. The fact that a complaint had been received against an individual would always be relevant information and should therefore be disclosed in a reference. We would expect a reference would disclose in addition, whether the complaint had been upheld, and whether compensation had been paid to the complainant.

    PIA's rules do not make any distinction between the way in which complaints received against an individual who is still in a firm's employ and those received against an individual who has left a firm should be treated. Some firms have adopted the practice of seeking comments from ex-advisers when a complaint is received however, such a practice is not required by PIA's rules on complaints handing, since a firm is responsible for the activities of its investment staff . . . The responsibility for investigating a complaint will always rest with the firm itself rather than with the individual who is the subject of the complaint.

  Whilst the PIA regard this issue as an issue for the employer, it is clear to us that employers believe that they are directly complying with PIA regulations in the supply of reference. A financial adviser can be excluded from the industry on the basis of their reference. Financial advisers have no rights to:

    —  View their complaints record which forms a part of their reference.

    —  Comment on a complaint.

    —  Appeal to an employer or regulator about a reference.

  CITU proposes that:

    —  Financial Advisers should have a right to see their regulatory reference.

    —  Financial Advisers should have a right to make representations to both the employer and the regulator concerning complaints listed in such a reference.

    —  Complaints that have not been upheld should not be part of a financial adviser's reference.

  CITU is in a position to provide written testimonials from our members who have been adversely affected by references from their employer which they believe are mis-leading or do not reflect the advice that they have given to the consumer.

24 March 1999

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