Two IFAs have been forced to redraft commission clawback clauses in their standard terms of business (ToB) letters following complaints from clients.
The FSA says it deemed two terms used by both unnamed adviser firms unreasonable under the Unfair Terms in Consumer Contracts Regulations 1999.
It says the terms did not clarify the amount that could be reclaimed from the consumer or the timeframe in which the firm could reclaim this amount.
It adds it felt this was unfair to consumers as it gave too much discretion to the firms to decide what amount could be reclaimed and when they could reclaim it.
The FSA says it expects senior management to take responsibility for ensuring their firms treat their customers fairly.
"This includes the drafting of fair terms in their standard form consumer contracts," it says
"The fairness of contract terms is a visible factor in assessing whether firms are treating their customers fairly."
It adds firms must put consumer fairness at the top of the agenda when writing their terms of business.
"While we do not object to a firm reclaiming commission from a customer in certain circumstances, to comply with the Regulations firms must draft terms that clearly state the consumer's rights and obligations.
"Further, in our view, where the purpose of a term is to reclaim commission from customers, this should be explained in the term."
Has run Cautious Managed fund since 2011
What’s right – not what sells
Richards fires back at committee report
Available on Investcentre platform
Invested from 2006-2011