Lawyers are warning that advisers will suffer from the Financial Ombudsman Service (FOS) practice of increasingly splitting complaints to achieve maximum rewards for consumers.
Law firm Reynolds Porter Chamberlain (RPC) warned that the ombudsman has become more active at asking claimants to submit separate claims in high value cases that involve different investments but only one advice firm and portfolio.
The current limit for single FOS compensation awards is £150,000.
RPC said it was concerned about the FOS's apparently-small number of high value complaints, which further pointed at an increase in complaints splitting.
In a submission to the high profile court case Clark vs In Focus Management, which earlier this month found FOS rulings were final, the FOS claimed it received around 87 complaints worth more than £150,000 in a year.
RPC partner Robbie Constance said he had been handed a final decision by the FOS which told him his client's case had been split into three.
Constance said: "The FOS is doing some funny things with these [complaints cases].
"We got a letter from the ombudsman, apparently a final decision, saying the adjudicator would be in touch with three new complaint references while the firm received a new complaint signed by all four members of the family under one reference. The FOS is not really moved until we take it all the way."
Hailsham Chambers barrister Simon Howarth, who represented In Focus Asset Management in its case, questioned whether the FOS has the power to intervene with client complaints in this way.
Howarth said: "It seems to me that they [the FOS] have no power to sever a complaint in that sense.
"They say we have an inherent jurisdiction. I say no they don't. They are a statutory tribunal they can do what it says on the tin of the statute but they can't do anything else and they don't have an inherent power.
"You've got Mr and Mrs Bloggs who made three separate investments each in three separate years advised by the same person and all six of those go wrong - have you got six complaints or have you got one with six instalments?
"It's a question of law and it's going to have to be fought out and it's not going to be good enough just for the FOS to say what's fair and reasonable."
More cases will be brought to challenge the FOS' position on ‘severing', RPC said.
Constance revealed the explanation he was given by a QC on when FOS could legally split complaints: "Where you have separate legal entities you are not going to be able to stop them make separate complaints and if you've got a SIPP as well as a trust that's being set up even by husband and wife, even if it's all part of a holistic piece of financial planning by the adviser, the presence of a separate legal entity in the form of a trust or a SIPP operator would probably be enough to create a right to a separate complaint."
The In Focus ruling making FOS awards final was welcomed by the industry, which feared a ruling in favour of the claimants could have had devastating effects on the claims culture in financial services.
Earlier this month, claims management firm Rebus, which had tried to intervene in the case against In Focus, created the Rebus Adviser Watch List, which it said is a look-up tool for investors who have invested in complex schemes to check whether their advisers have previously been found by the FOS or the courts to have mis-sold them.
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