10th February 2013

Adviser Alert from Evan Owen

A former Appointed Representative has been granted permission to appeal a High Court Judgement which has implications that could potentially affect all Appointed Representatives.

Mark Wayman the sole proprietor of Endowment Surrender Plus (ESP) was an Appointed Representative of Becque Wayman Investments Limited (BWIL).  (To avoid confusion Mr Wayman was neither a director nor shareholder in BWIL at the relevant time).

In October 2012 at Manchester Civil Justice Centre, Mr Justice Hodge found in favour of  the Claimants – two trustees of a Settlement in a misselling claim against Wayman, ESP and their principal company BWIL.

All documentation issued by ESP to the clients was fully compliant with FSA rules and contained the proper status disclosure. ESP also had a fully compliant Appointed Representative Agreement with its principal BWIL whereby BWIL took full responsibility for all investment business written by ESP. BWIL also had PI insurance covering itself and its Appointed Representatives.

BWIL ceased to be directly FSA authorised in April 2009 and became an AR of a Network. Its PI insurance policy had a renewal date in September and it intended to effect run-off cover with the insurer. Unfortunately cover was refused because of BWIL’s previous claims history (basically one claim by, as it happens, one of the trustees of the case involved here – incidentally this individual is the driving force behind one of the UK’s largest Financial Complaints handlers).

The complaint was made in November 2009 just 2 months after BWIL’s PI cover expired. At the trial in October last year the judge ordered the three defendants, Wayman, ESP and BWIL to pay over £600,000 in costs and damages.

The defendants argued that there should only ever have been one defendant - the principal company BWIL because of s.39(3) of the Financial Services and Markets Act 2000 – however the judge also found against the AR under Common Law and this was basically because the Judge did not think the term ‘Appointed Representative’ was understandable.  Had ESP described itself as an ‘agent’ of BWIL then this would have been acceptable and under common law he would not have found against ESP and Wayman.

The term ‘Appointed Representative’ has been used since the Financial Services Act was introduced in 1988 and, had we substituted the word ‘agent’ we would have been in breach of FSA rules. This important and far reaching judgement seems to hinge on what the term ‘Appointed Representative’ means and it appears that this has never been tested in court before. 

Look up the word Representative in any dictionary and you are almost certain to see the word Agent as one of the definitions.

A small excerpt of the definition of ‘Representative’ in the Oxford Dictionary says:

noun

• a person chosen or appointed to act or speak for another or others, in particular:
• an agent of a firm who travels to potential clients to sell its products:

This judgment has potentially set a very worrying precedent and could have an impact on any Appointed Representative particularly those who have been AR’s of Principals or Networks which have ceased to trade.

The implication is that the liability agreement between the principal and the AR is void because this judgment sets aside FSA rules in favour of Common Law, and under common law a former AR could potentially be liable for up to 15 years after the event.

Mr Wayman and his wife (who was a partner of ESP at the relevant time) face bankruptcy unless they can get this judgment overturned at the Court of Appeal later this year. His ex-principal company BWIL has ceased to trade and has no assets.

London based specialist barrister Anthony Speaight QC is acting for Wayman and ESP but the main concern is the ongoing cost of the Appeal. Wayman has virtually exhausted his available assets on the costs of the defence so far, having spent over £60,000.

This is an important case and unless it can be overturned the implications potentially could affect many Appointed Representatives. If any organisation or individual wants to help with the cost of the appeal Mark Wayman be very pleased to hear from them.

Evan Owen

Adviser Letter of the Week