The FSA is threatening "follow-up action" against an IFA seeking to time-bar client complaints by including a 15-year long-stop in his terms of business (ToB) contracts.
It has written to Phil Castle, managing director of Kent-based IFA Financial Escape, warning his plans are "highly likely" to be in breach of several of its principles, including its TCF initiative.
In a letter seen by Professional Adviser, it warns: "We would expect to take follow-up action with any firm we believe to be contravening [our] requirements."
Castle is seeking legal advice over whether he can introduce a long-stop, under contract law, into his ToB and says he intends to press ahead with his plans. He has offered to show the regulator draft wording but says it has turned him down.
The news comes as the Association of IFAs (AIFA) renews calls for a long-stop, saying it is "completely unacceptable" IFAs should be subject to rules "no other profession is".
The FSA maintains it has been "unable to demonstrate" where introducing a long-stop would bring additional benefits to both consumers and firms.
In its letter to Castle, dated 5 October, it states: "I note your intention to insert a long-stop clause in your ToB. While we have not seen the wording you intend to use, it is highly likely that we would consider any attempt to insert a long-stop clause into a firm's ToB to be unacceptable."
Castle says: "The FSA has implied it will take action against me, yet how can it tell us we can't use something it has not even seen. This is totally unacceptable. The FSA's refusal to even discuss this issue is disgusting."
Castle and a number of other advisers are particularly angry at the FSA's refusal to consult on introducing the rule, which is afforded to other professions via the statute of limitations.
Alan Lakey, partner at Highclere Financial Services, says: "This is not just about the reality of advisers being devastated by stale claims - which may not be readily defendable due to time constraints and lack of files - but also the reality that there is a major principle at stake.
"Maybe the FSA has dropped principles-based regulation, but I want to operate my business in a balanced environment where my clients and myself have access to and succor from the rule of law."
Chris Cummings, director general of AIFA, adds: "The lack of a definitive long stop means financial advisers are subjected to infinite liability.
"Despite the very few cases brought against IFAs and the significant amount of consumer trust the profession enjoys, it is completely unacceptable that IFAs should be subjected to rules no other profession is."
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