City lawyers may be asked to participate in a review task force being set up by the independent financial advisers' association (IFA), following its judicial review of the Securities and Investments Board (SIB) guidelines for compensating investors.
The review task force will aim to negotiate with and advise frontline regulators.
The group will consist of IFAs, product providers and professional indemnity insurers. It may also have a public interest involvement. A number of companies are understood to be on board already.
Its role will be to agree with the frontline regulators the quickest method of ensuring that those who have been misadvised will "gain the compensation due," says the IFA Association.
Garry Heath, chief executive of the IFA Association says: "We hope that this approach would have support from all quarters."
Conceding that lawyers will have to be involved, Heath says: "There will have to be legal advice."
The judicial review last week (The Lawyer 16 May) failed to block the SIB guidelines by
declaring them unlawful. The guidelines are taken by front-line regulators like the Personal Investment Authority (PIA) and used as a basis for direct guidance for IFA and pension company members to compensate the public.
However, the judges did find that part of the SIB guidance was "wholly irrational" and therefore still ultra vires. They said the guidance did not explicitly state that "IFAs are not to be required to take any step which will invalidate their insurance cover without their
insurers' consent. To that extent...the statement is wholly
The SIB undertook in court to amend this immediately.
The judges also suggested that the extent of the SIB's legal powers and its frontline regulators like the PIA, both between themselves and over their industry members is unclear and could be subject to scrutiny in any further judicial reviews.
v City firm Allen & Overy is acting for insurance giant Sun Life in a High Court judicial review challenge to the PIA over a PIA rule which forces life offices and IFAs to pay compensation on behalf of collapsed IFAs which were not PIA members.