Based on initial findings of the Financial Ombudsman Service in a case relating to the fall of the Isle of Man-based Icelandic bank, it appears many advisers will be vindicated in their classification of KSF IoM as ‘low-risk’.
In a letter to an IFA, whose ‘low risk’ client had sought compensation based on the loss of a deposit in the bank – which was wrapped inside a Clerical Medical International offshore bond, the FOS said that because credit agencies had given KSF IoM a high credit rating, the advice was essentially sound.
According to one media report, the financial ombudsman also said that because the adviser’s terms of business only dictated he give one-off advice, rather than requiring him to constantly monitor the continuing suitability of past advice, he could not held to account for failing to identify or act on any later changes in the situation.
The adviser is being represented by law firm Foot Anstey.
KSF IoM collapsed at the height of the credit crisis in October 2008, resulting in thousands of investors losing millions of pounds.
A compensation scheme has seen many recover significant sums, though offshore bond investors, whose deposits were estimated to exceed £400m, received some of the lowest payouts.