A customer of a financial advisory firm who suffered from significant losses after poor advice has had her case against the Financial Services Compensation Scheme (FSCS) held up.
FSCS is a body that provides compensation rulings to people who claim to be victims of poor, or negligent recommendations from companies in the consultancy industry.
Charmaine Emptage bought a house in Spain, but launched a claim with the FSCS after she alleged Peter Sharratt, a broker working for Berkeley - a now-defunct advisory business - had given her poor guidance on what to do with the home.
Mr Sharratt advised the woman she should change her £40,000 repayment mortgage in favour of an interest only loan worth upwards of £111,000 and was also told to invest more than £70,000 in the property.
This was suggested to the woman because increasing numbers of Britons were moving to Spain with their pensions as part of a trend of "retiring to the sun" - popularised by a number of TV programmes.
Even though the FSCS ruled that Ms Emptage should be paid £11,520 in compensation because of the poor mortgage advice, it said she was ultimately responsible for the investment of £70,000 into her property.
However, she appealed this at the high court and a judge there ruled in her favour - forcing the FSCS to pay £150,000 in legal costs.
Judge Martin Moore-Bick, who was presiding over the case, said in his verdict: "The loss suffered by Ms Emptage flowed from Mr Sharratt's bad advice in relation to mortgaging her home, which was a regulated activity.
"FSCS had power under [an] Act and the rules made under it to pay fair compensation in respect of that loss. I think the judge was right in finding that it was at this point that FSCS went wrong."
This ruling will have significant ramifications for others in similar positions to Ms Emptage who may also have received poor advice from firms.
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Posted by Francesca Witney