by David Chaplin
Dave McMillan, PAA chief, told Good Returns the organisation has fielded calls from a number of advisers after the IFA last week publicly named two advisers who had breached its code of ethics.
While McMillan was not prepared to comment about the details of the IFA cases, he said some advisers have indicated they were feeling "extremely exposed" in the wake of the public release of the disciplinary determinations.
In a letter sent to PAA members yesterday, McMillan said: "In the main, these members have expressed concern regarding the potential financial and professional exposure for members of a professional association.
"I do not intend to comment specifically about the exposure for members of the organisation for whom the determinations were conducted other than to say all members of any professional association need to understand their membership rights and obligations."
He said the PAA had adopted a "principles-based" philosophy to its complaints procedure as more prescriptive methods "while simpler to administer, do not always cater for the true complexities of the advice process in the financial services industry".
Earlier this year the PAA decided to delay the complaints process for any case that is, or could be, subject to civil action until the formal legal hearings were completed.
McMillan also refuted claims in a recent National Business Review story that the entire financial advisory industry was facing a professional indemnity (PI) insurance crisis.
"The main message of the article was that a number of advisers had come to realise that their PI cover did not provide them with defence costs in the event of a claim. More specifically this related to a number of advisers who were the subject of complaints regarding finance company investment advice," he said in yesterday's newsletter.
"The article implied that there was industry wide concern regarding this issue. The fact is that the PAA PI scheme does cover defence costs for its participants. On this basis the issues raised in the NBR article have no relevance to members of the PAA PI scheme."
The IFA recently attacked insurer Lumley for reneging on a number of PI claims. The industry body is currently surveying members to establish the extent of the PI problem.
Lyn McMorran, IFA president, has also acted to soothe members upset about the decision to name two advisers found guilty of breaches of the organisation's code.
"Only 16 [of 55] complaints have resulted in the member being found against the members concerned, eight of which went before the Disciplinary Committee, and of these only two involved a penalty of making the names of the members involved public," McMorran said in a statement.
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