UK: FCA Handbook Can Assist In Delineating Financial Advisers' Duty Of Care: David Anderson v Openwork Ltd (2015)

This recent County Court decision makes clear that the provisions of the FCA Handbook, even if they do not directly apply, can still inform the duty of care that a financial adviser will be held to.

An appointed representative of the IFA network Openwork advised Mr Anderson to purchase an unregulated investment bond in September 2005. Mr Anderson subsequently sued, alleging that Openwork had made negligent misstatements relating to the bond, that the advice given had breached the Conduct of Business ("COB") rules, and that Openwork had failed to take reasonable steps to ensure that the bond was suitable for his needs. He was partially successful at first instance. Openwork appealed, contending that (on the basis of Green & Rowley v RBS (2013)) there was no need for a common law duty of care to be imposed in circumstances where Parliament had devised a remedy (in this instance, section 150 (now section 138D) of the Financial Services and Markets Act 2000) and that, even if a common law duty of care arose, reference to the COB rules when determining the content of that duty imposed too high a standard. Openwork also argued that there had been no evidence of breach.

In dismissing Openwork's appeal, the Court found that a common law duty of care did apply, as Openwork had given advice in respect of the bond and the bond was not covered by the COB rules. In contrast, Green & Rowley was primarily concerned with the provision of information in respect of a financial product that was covered by the COB rules. The Court held that it was appropriate to take into account the standards set out in the COB rules when considering the standard of Openwork's common law duty of care. In any event, the provisions referred to at first instance ("know your client"; ensure the suitability of the product for the client's needs; and ensure that the client understands the risks associated with the product), were "no more than basic duties which common sense dictates should be applied to any financial advisory situation". As such, there were no grounds to set aside the first instance judgment.

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