MAKING CLAIMS AGAINST FINANCIAL ADVISERS
29/04/2010
There are many factors for clients to consider if they believe they have a claim against their financial adviser and/or AFSL holder for economic losses that may have been incurred as a result of advice received.
The client may believe that the adviser undertook investments that were outside of the appropriate investments for the type of investor or that information was withheld or not provided. As a result, the client may seek to make a claim against the AFSL and/or financial planner for any economic loss suffered.
One of the important decisions for the client to make is whether to seek resolution through an external dispute scheme or to commence court proceedings. Listed in the table below are some of the factors that should be considered by the client in making a decision to pursue a claim.
Issue |
FOS |
Court proceedings |
Monetary limit |
$150,000 per claim |
No monetary limit on compensation |
Parties to claim |
Claim only against members of FOS |
Claim against all possible defendants irrespective of membership of external dispute scheme |
Grounds for claim |
Typical grounds for claim include: · breach of contract; · negligence; · breach of Corporations Act 2001; and · breach of Australian Securities and Investments Act 2001 |
Typical grounds for claim include: · breach of contract; · negligence; · breach of Corporations Act 2001; and · breach of Australian Securities and Investments Act 2001 |
Cost of claims |
Less than court proceedings as procedure governed by the FOS Terms of Reference. |
More expensive than costs in FOS, but difficult to predict, as it depends on the complexities and the conduct of the defendants and on the expert evidence that may be required to quantify the economic loss suffered. |
General timing and procedure |
Claim made, FOS member asked to respond, submissions made by parties and determination made by FOS (up to 12 months) |
Difficult to determine but could be 2 years or more depending on issues of: · expert evidence on quantum of loss; · discovery of documents; · subpoenas to be issued; · lay evidence; and · any cross claims by the defendants. |
Effect of decision |
Decision of FOS is binding on the FOS member but not on the complainant. The FOS member not having any rights to appeal the merits of the decision. |
Decision binding on all parties. Appeal possible by any party. |
Worst case scenario for the client |
FOS deny claims in full and client pays own legal costs, but client can still commence court proceedings after FOS determination if the client does not accept the FOS decision. |
Claims unsuccessful, no damages awarded and the client may be ordered to pay the legal costs of the defendants plus the client’s own costs. |
Best case scenario for the client |
FOS accepts claims by and compensation is ordered, with the client paying their own legal costs. |
Damages awarded for losses plus interest and the defendants are ordered to pay the client’s costs |
If you have any questions in regard to FOS complaints or litigation, please contact David Nicoll of TOWNSENDS BUSINESS & CORPORATE LAWYERS on (02) 8296 6222.