McMEEL AND VIRGO ON FINANCIAL ADVICE AND FINANCIAL PRODUCTS THIRD EDITION. Edited by GERARD MCMEEL AND JOHN VIRGO. With the Assistance of

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1 McMEEL AND VIRGO ON FINANCIAL ADVICE AND FINANCIAL PRODUCTS THIRD EDITION Edited by GERARD MCMEEL AND JOHN VIRGO With the Assistance of RICHARD CLARK, TOM DUNN, ROSS FENTEM, TIM POPE, LUCY WALKER, AND MAHRIE WEBB OXFORD UNIVBRSITY PRESS

2 CONTENTS Table ofcases Table oflegislation List ofabbreviations List of Contributors xxiii xli lxxv lxxxi I THE INDUSTRY AND REGULATORY CONTEXT 1. The Legal and Regulatory Framework A. Hie Context: Wealth and Financial Services 1.01 B. Principal Features of the Legislation and Regulatory Regime 1.21 C. Hie Approach and Scope of this Work 1.38 D. Advice, Information, and Product Regulation 1.47 E. The European Dimension Hie UK Regulatory Framework A. Hie Financial Regulatory System 2.01 B. Hie 2000 Act: Authorization and Exemption 2.17 C. Key Elements of the Regime 2.47 D. Hie Handbooks 2.66 II CAUSES OF ACTION 3. Unregulated Financial Services and the Impact on Transactions A. Background 3.01 B. Principles Developed Before the 2000 Act 3.03 C. Hie Integrity of Transactions under the 2000 Act 3.15 xv

3 4. Breach of Statutory Duty Contents A. General Principles 4.01 B. Background to the 2000 Act: Causes of Action in the 1986 Act 4.16 C. The 2000 Act: Who Can Sue? 4.21 D. Principal Statutory Cause of Action: Section 138D 4.25 E. Other Causes of Action under the Act for Breach of Statutory Duty 4.41 F. Rights of Action in the FCA Handbook Claims in Contract A. Introduction 5.01 B. Contracts to Provide Financial Advice: Problems of Consideration 5.02 C. Incorporation and Implication of Terms 5.04 D. Interpretation or Construction 5.08 E. The Unfair Terms in Consumer Contracts Regulations Misrepresentation and Duties of Disclosure A. Introduction 6.01 B. Misrepresentation 6.03 C. Duties of Disclosure at Common Law and in Equity Negligence A. Introduction 7 01 B. The Duty of Care 7 04 C. Concurrent Liability 7 32 D. Duties to Persons Other than the Immediate Client 7.37 E. Duties Owed by Persons Other than Advisers 7.48 F. Duties of Care and Commercial Investors G. The Impact of Contractual Provisions on the Common Law Duty of Care xvi

4 8. Equitable Claims: Fiduciary Obligations, Undue Influence, and Unconscionability A. Fiduciary Obligations 8.01 B. Undue Influence 8.27 C. Inequality and Unconscionability 8.66 III INTERMEDIARIES AND FINANCIAL PROMOTION 9. Intermediaries A. Introduction 9.01 B. The Common Law Rules of Agency 9.09 C. Appointed Representatives, Statutory Agency, and Vicarious Responsibility 9.22 D. Polarization and Depolarization Financial Promotion A. Introduction B. Unauthorized Persons and the Financial Promotion Regime C. Financial Promotion and Collective Investment Schemes D. Authorized Persons and the Financial Promotion Regime Standards of Conduct: Overview IV STANDARDS OF CONDUCT A. Introduction B. The Standard of Care in Negligence C. General Principles of Compliant Financial Advice Standards of Conduct for Investment Advice, Stockbroking, and Portfolio Management A The Development of the Investor Protection Rules B. The Conduct of Business Sourcebook xvii

5 13. Regulated Collective Investment Scheines Tom Dunn and Mahrie Webb A. Introduction to Collective Investment Schemes in the UK B. Statutory Definition of a CIS C. CIS Exclusions D. The Alternative Investment Fund Managers Directive E. Consequences of there being a CIS F. Consequences of there being an AIF G. UCITS and Other Authorized CIS in the UK H. Categories of UK Authorized CIS I. Powers and Duties of the Authorized Fund Manager and Trustee J- Delegation K. EMIR Standards of Conduct in General Insurance Business Tim Pope A. The Regulation of Insurance Mediation Activities by the FCA B. Bringing the Insurance Contract to the Market Advertising and Inducements C. Selling, Advising on, and Arranging Sales of Insurance Contracts by Firms D. Handling the Premium and Other Money E. Cancelling the Insurance Contract F. Claims Handling Standards of Conduct in Mortgage Lending and Advising Richard Clark A. The Regulation of Mortgages and Advice by the FCA B. What Activities Fall within the Regulatory Regime? C. Designing, Marketing, and Distributing Mortgage Products D. Designing, Promoting, and Distributing Equity Release Products E. Treating Customers Fairly Ongoing Obligations xviii

6 V DEPOSIT-TAKING AND CONSUMER CREDIT CONDUCT OF BUSINESS 16. Conduct of Business for Banks, Other Deposit-takers, and Payment Services Providers A. From Self-regulation to Statutory Regulation B. Regulation of Payment Services C. Banking Conduct of Business D. Lender Liability Regulation of Consumer Credit Business by the Financial Conduct Authority Ross Fentem and Lucy Walker A. Introduction to the Consumer Credit Regime B. Credit-related Regulated Activities C. Authorization, Supervision, and Enforcement of Credit-related Activities and Credit Firms by the FCA D. Conduct of Business Standards: CONC E. Rights of Action and Complaints to the Ombudsman Remedies VI REMEDIES A. Damages B. Damages under the Financial Services and Markets Act C. Particular Products D. Incidental Heads of Claim E. Regulatory Remedies F. Judicial Review G. Human Rights and Misfeasance as Exceptions to Statutory Immunity Accessing Compensatio»: Hie Framework A. Complaints Handling xix

7 B. Alternative Dispute Resolution C. Expert Determination«D. Mediation E. Financial Ombudsman Service F. Financial Services Compensation Scheme G. Consumer Redress Sehernes H. Court Proceedings I. Restitution Orders and Injunctions J. Regulatory Duties K. Insolvent Firms L. The FCA Review oflnterest Rate Swaps VII BRINGING AND DEFENDING CLAIMS 20. Proving Liability and Loss A. Expert Evidence B. Use of Expert Evidence in Court C. Expert Evidence Liability D. Expert Evidence Quantum E. Summary of Expert Witnesses' Duties F. Expert's Immunity 21. Claims Investigation and Presentation A. Presenting the Claim B. Avenues for Disclosure C. Witness Statements D. Instructing Experts E. Costs Issues F. Loss Schedule 22. Defending Claims A. Scope of Chapter XX

8 B. First Steps Insurers C. Response D. Legal Advice and Litigation Privilege Defences A. Responding to Claims B. Limitation C. Causation D. Contributory Negligence E. Contribution Against Third Parties F. The Defence of Contractual Estoppel VIII FINANCIAL SERVICES AND SOLICITORS 24. Financial Services and Solicitors A Regulation of Professionals B. The Historie Position of Solicitor Firms C. The Scheme of the Solicitors' Investment Business Rules D. Authorization under the Financial Services and Markets Act Index 1007 xxi

THE COMMON LAW LIBRARY NUMBER 12 JACKSON & POWELL ON PROFESSIONAL NEGLIGENCE FOURTH EDITION

THE COMMON LAW LIBRARY NUMBER 12 JACKSON & POWELL ON PROFESSIONAL NEGLIGENCE FOURTH EDITION LONDON SWEET & MAXWELL 1997 Preface Table of Principal Works Referred To Table of Cases Table of Statutes Table