The board of the Personal Investment Authority (PIA) decided yesterday to press ahead with guidelines forcing independent financial advisers (IFAs) to contact their clients and ask them if they believe they have been badly advised.
The PIA's decision, to be announced next week, looks set to start a bitter legal battle with the IFA Association, the advisers' trade body. The IFAA has won a restraining order against another watchdog, the Insurance Brokers Regulatory Council, preventing it from implementing very similar guidelines.
However, lawyers for the PIA yesterday said that counsel's opinion, taken last week, suggested the regulator could defend its stance.
This was because, unlike the IBRC, the PIA had consulted its members on its proposals. The PIA's plans follow a report by the City's senior regulator, the Securities and Investments Board, in November.
This found that at least 350,000 people might be in need of urgent compensation totalling up to £3bn for being wrongly advised to transfer out of their work pension schemes.
Advisers carried out a third of all transfers. However, they are opposed to the PIA's proposals, believing that they violate the Financial Services Act.
IFAs argue that if they contact clients any claims against them will not be met by their professional indemnity insurers, in effect bankrupting them.
The PIA yesterday agreed that if indemnity was a problem then clients could be contacted by its own pensions unit instead.
But IFAs will be charged for the work carried out by the pensions unit. No price has yet been set for this. It is believed the board rejected a call, backed by Colette Bowe, its chief executive, for more work on a less urgent area of transfer cases before agreeing to guidelines.Reuse content