Memorandum by the Confederation of Insurance
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
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
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
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