Widening the net: Emptage v FSCS

The Court of Appeal considered whether advice on an unregulated activity arising from a regulated activity was within the jurisdiction of the FSCS. It also considered the extent of the FSCS’s discretion determining whether, in the exercise of its discretion, it was entitled to exclude losses arising from an unregulated activity.

Mrs Emptage, the claimant, sought financial advice from her financial adviser about reducing her repayment mortgage of almost £40,000 on her home in Sandhurst. He advised her to re-mortgage with an interest-only mortgage of £112,000 and invest the balance in a Spanish apartment. Emptage followed that advice. Subsequently, the Spanish property market crashed and her investment turned out to be worthless. She was unable to repay the interest-only re-mortgage on her home. Her financial adviser was illiquid and uninsured, so the claim was dealt with by the FSCS.

The FSCS conceded that the advice was negligent and awarded compensation of £11,522 on the basis that it could only compensate for losses arising from the regulated re-mortgage on Emptage’s English property but not for losses arising from the Spanish investment (which was not regulated)…

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