Decade-long battle saw FSCS 'bullying' and FOS 'solicit complaints'

11 August 2011 | By Nicole Blackmore

Retired IFA John Calland is suing the FSA for harassment after a 10-year battle with the regulator, the FOS and the FSCS.

Calland says all three bodies shared files and collaborated to progress loss assessments against him and force him to compensate former pension clients, who had never complained to him about the advice he gave.

Independent complaint assessors for the bodies have found that the FOS solicited complaints from former clients against Calland and the FSCS’s prolonged pursuit of details of his financial assets and liabilities, which included threats of imprisonment, amounted to “bullying”.

Calland says: “I have suffered continual harassment from the regulatory agencies about pension questionnaires which were solicited five years after my retirement, and despite the fact that no pension client has ever complained to me.”

Calland retired as principal of Calland Insurance and Mortgage Services (CIMS) in December 1997 after selling the firm to his son, John Calland Jr.

In May 1998, the Personal Investment Authority (Pia), which preceded the FSA, wrote to Calland Jr acknowledging that the firm had completed its pension review when Calland Sr was the proprietor.

Then on November 9, 1998, Pia wrote in error to all 287 CIMS pension clients stating that the firm was no longer authorised to advise on pensions. It asked clients to complete an enclosed questionnaire to see whether they had been “badly advised”.

On November 10, 1998, Pia sent a retraction letter to the clients and a letter of apology to Calland Jr, but Calland says this mailing undermined his son and damaged the firm’s reputation.

In the same month, Pia wrote to Calland Jr, asking if he had taken over all regulatory responsibility and liability for any redress payments for both phases of the pension review and in January 1999 Calland Jr confirmed this.

In January 1999, Pia wrote to Calland Jr, saying that, as a result of his confirmation, Pia did not intend to undertake any action in respect of either CIMS’s phase one or phase two of the pension review but that the firm would be subject to the normal monitoring requirements.

In March 2000, Calland Jr was declared bankrupt and CIMS ceased trading, without Calland Jr formally completing phase two of the pension review. However, before his retirement, Calland completed a review all his firm’s pension business, which covered phases one and two of the review.

In April 2001, the Investors’ Compensation Scheme, which preceded the FSCS, wrote to Calland saying it had received a claim for compensation from a former client. It said a preliminary loss assessment had identified a potential loss of £6,742, but that it had not investigated the circumstances surrounding the advice given.

It asked Calland to complete a voluntary statement of assets and liabilities, in order for it to decide whether he would be unable to meet claims against him and if the firm should be declared in default. Calland did not complete the statement.

In July 2001, Pia decided that Calland remained liable for the complaint because he had not provided the information requested, so the client must complain directly to Calland.

Calland says the former client did not contact him but in July 2002, the FSA wrote to Calland saying it was investigating CIMS’s “apparent failure to comply with its pension review obligations” and requested he voluntarily provide a statement of personal and business assets and liabilities.

When he again did not respond, Calland says the FSA and the FSCS colluded to find a way of forcing him to comply with their requests.

An internal FSA report from August 2002, obtained by Calland through a freedom of information (FOI) request, states: “As Mr Calland is no longer a member (he left membership in 1998), he is under no obligation to cooperate in any way. Nor is he subject to any form of FSA disciplinary action.”

But in an email from the FSA’s enforcement division to the FSCS in October 2002, also obtained through an FOI, the FSA says: “Last time we spoke, the FSCS was not getting any cooperation from Mr Calland Sr with regard to his financial details. I have been thinking about how the FSA could ensure Mr Calland Sr’s cooperation, but unfortunately have come up against a few issues.

“You are probably aware that the FSA has various powers to ’force’ compliance with compulsory requests for information. However, our legal team over here is of the opinion that the FSA could not use compulsory powers to require the information from Calland Sr as part of our current investigation.

“Further, the circumstances surrounding Calland Sr do not justify an investigation into his resources (as Calland Sr has not actually done anything ’wrong’).

“The FSCS has powers under FSMA by which it can require information from ’relevant persons’ and enforce the requirements through the courts (by contempt proceedings). This is dependent, however, upon a claim being made against that person. We were unsure whether the referral of a loss from the FSA’s Pensions Unit to FSCS would be considered to be a ’claim against that person’.

“What we are really after is some idea from the FSCS concerning their views on exercising their own powers in this situation.”

At this point, Calland says the FSA attempted to stir up complaints against CIMS.

In December 2002 and again in February and April 2003, the FSA wrote to all 287 former CIMS pension clients informing them they might be eligible for compensation and asking them to complete a questionnaire.

In April 2003, the FSCS wrote again to Calland seeking information about his finances and threatened Calland with legal proceedings if he did not comply.

In May 2003, Calland received a letter from the FSCS saying it had received details from the FSA of preliminary loss assessment claims from five former clients and again requested financial information and reiterated its threat of legal action.

This was followed by a letter from Denton Wilde Sapte, the FSCS’s lawyers, in August 2003, which threatened him with a fine or possible imprisonment if he did not comply.

Calland continued to argue that loss assessments were not claims and did not provide personal details of his finances but claims he offered to assist in the FSCS’s investigations.

In November 2003, Calland and his wife feared that their assets would be unfairly seized and they relocated to Spain. However, Calland says he ensured that he remained in communication with the regulatory authorities.

In March, August and October of 2004, Calland received further demands for his financial details from the FSCS. In October, he received a letter from the FSCS which said the total value of the loss assessments received from the FSA to date was £157,033.

When Calland refused outright to reveal his finances the FSCS informed him that it had advised all CIMS pension clients with loss assessments to contact either Calland directly or the FOS. At that point, the FSCS withdrew from correspondence with Calland.

Calland maintains that none of his former pension clients contacted him with a complaint, despite being advised to do so by the FSCS.

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