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Provider liable for unauthorised investment advice on
unsuitable product
9 August 2007
In Michael Walker v Inter-Alliance Group
and Scottish Equitable (July 2007) the High Court ordered
Scottish Equitable to pay damages provisionally assessed in the sum
of £700,000 to an IFA's client, Michael Walker. The decision is
welcome news for financial advisers and their professional
indemnity insurers because it means that product providers cannot
necessarily escape liability by hiding behind IFAs if their broker
consultants wander into investment advice territory.
Mr Walker was entitled to a valuable inflation
linked final salary pension. However, following meetings with his
financial adviser and a representative from Scottish Equitable Plc,
Mr Walker decided to transfer his benefits, to a Scottish Equitable
Plc deferred phased retirement and draw down plan.
When the value of Mr Walker's pension
plummeted, he realised he had been mis-advised and issued
proceedings against his IFA and Scottish Equitable Plc. Mr Walker
alleged that his IFA and the Scottish Equitable consultant both
advised him to transfer out of his final salary scheme. Following
Inter-Alliance entering administration, Mr Walker proceeded against
Scottish Equitable alone.
The High Court accepted Mr Walker's evidence
that his financial adviser and the representative from Scottish
Equitable had both separately assured him that transferring out of
the final salary scheme was the right thing for him to do. Having
made that finding of fact, the Court determined that Scottish
Equitable Plc provided Mr Walker with unauthorised investment
advice.
This case indicates that where product
providers' broker consultants go beyond simply confirming facts and
dealing with technical queries, the Courts will not hesitate to
hold them liable for unsuitable investment advice, even where they
are not authorised to do so and the client is also being advised by
an IFA.
For more information or advice, please contact
Jonathan
or Nik.
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