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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 IFAs 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 Walkers 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 Walkers 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.

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