The Financial Ombudsman service has published advice on mis sold financial investment complaints and redress to these mis sold financial products. Maple Leaf Financial is a relatively new company,however our team has many years of experience and success. Each case is different and they are all assessed individually.
Calculating redress in financial investment complaints
This is a quick guide to help investment advisers and financial businesses who receive relatively few complaints. It explains how redress is likely to be calculated if we uphold an investment-related complaint.
Where we uphold an investment-related complaint, we usually aim to put the consumer in the position they would now be in, if the financial business had acted correctly. In complaints about investment advice, this is likely to be the position the consumer would now be in, if they had received suitable investment advice.
how do we decide what would have been suitable advice?
In some cases, a suitable investment may originally have been discussed as an alternative to the unsuitable investment. In these circumstances, it may be appropriate to tell the financial business to pay redress based on that investment. Similarly, where money was transferred from another investment, we may decide to award redress based on remaining in the original investment.
In other cases, however, there may be no conclusive evidence as to what suitable investment would have been arranged, if the consumer had not taken out the unsuitable investment. In these cases, even if we can’t identify exactly what suitable investments the consumer would otherwise have taken out, we may be able to identify some qualities those investments would have had. In such cases, we will tell the financial business to compare what the consumer actually got with a benchmark that would broadly reflect those qualities – for example, a particular stockmarket index, an average deposit rate or a combination of these. However, the identification of an appropriate benchmark must take account of the particular circumstances involved and there may be situations which require us to take a different approach – for example, using Bank of England base rate.
what if the consumer still has the unsuitable investment?
Working out the loss involves comparing the consumer’s current position with the position they would now be in, if they had not taken out the unsuitable investment.
what if the consumer no longer has the unsuitable investment?
If the consumer no longer has the investment, we are likely to tell the financial business to calculate the investment loss up to the date the consumer ceased to have the investment – comparing the consumer’s position at that date with the position they would have been in at that date, if they had not taken out the unsuitable investment. In addition to the redress for the investment loss – up to the date the consumer ceased to have the investment – we are likely to tell the financial business to pay interest on the investment loss, from that date up to the date the financial business actually pays the redress. This is to reflect the fact that the consumer has been “deprived” of the redress for the investment loss since it accrued (when they ceased to have theinvestment).
Compensation for being deprived of money might be subject to income tax. The law requires the financial business to deduct income tax at the lower rate from this interest – but not from the investment loss – and to pay this to the Inland Revenue. Unless the circumstances indicate otherwise, we are likely to set the interest rate at 8% simple. This takes into account what the consumer is likely to get after tax, and what it would otherwise have cost to borrow the money during the period the consumer was “deprived” of it. It is not based on what a consumer could get by investing.
what about cases where suitable advice would have been not to invest?
In cases where we consider that the only suitable alternative investment would have been a deposit-type account, we are likely to award redress for being “deprived” of the money at a rate equivalent to the interest paid on a suitable deposit account. A suitable deposit account may be one that the consumer already holds – or one which would have met their requirements. It may be a fixed-term deposit.
Where we can’t identify a suitable deposit account, we may – depending on circumstances of the case – use an appropriate benchmark, as we have described above.
what happens when income or other withdrawals have been taken?
The calculation of investment loss needs to take into account amounts paid out by way of withdrawals, distributions of capital or income paid before tax. The financial business should ensure that its calculations properly reflect the historyof the investment – involving a series of calculations to allow for regular or nonregular withdrawals, as and when they were made.
For example, where an investment was designed to produce a regular income, the financial business should not deduct all the withdrawals upfront before calculating the return. Instead, the financial business needs to make a series of calculations, each one reflecting income withdrawn at a different time.
what about other forms of redress?
Occasionally we may require that an investment should be “rescinded” – unwound back to the beginning. This might happen, for example, if the complaint involves a protection policy with little or no investment value. In these cases, we are likely to award a refund of premiums with interest added at a rate of 8% simple.
what if the consumer had required life cover?
Where we consider that life cover would have been appropriate for the consumer concerned, this can be taken into account in the calculation of redress by including the cost of an appropriate decreasing-term
how are the calculations run?
Once a financial business has established the relevant history of the investment, it will need to enter that data into a spreadsheet – to model the performance of the unsuitable investment against the suitable investment. These calculations will normally be quite complex and it is unlikely that they can be carried out manually.
There are software packages on the market that have been specifically designed to carry out these calculations. For financial businesses that receive relatively few complaints, it may be easier to pay a company that specialises in this type of service to carry out the necessary calculations on their behalf.
The Bank of England keeps a record of all base rate changes on its website (available as a spreadsheet at:
The Association of Professional Financial Advisers (www.apfa.net) and the Institute of Actuaries (www.actuaries.org.uk) can suggest companies that offer these services.
We can’t recommend which company, if any, should be engaged to carry out redress calculations. For more general information about the tax treatment of redress, please see our technical notes, is compensation taxable? (available online at: www.financialombudsman.org.uk/publications/guidance/comp_tax.htm).
The exact tax treatment of any compensation awarded to an individual consumer is likely to depend both on the circumstances of the case and on the consumer’s own wider financial and tax position. This is not something we can advise on.
Maple Leaf Financial
Each mis sold investment case is different and they are all assessed individually. Sometimes we can claim because investments were simply unsuitable and they were mis-sold. In other cases it may be because of technical shortcomings in contracts, regulatory issues or a combination of these factors.
‘Most of our clients had no idea there was a problem with their policies or investments before they spoke with us. You have nothing to lose by calling Maple leaf financial investment mis-selling to find out about your own arrangements.
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