Insights

Financial services regulator the Financial Conduct Authority (FCA) requires IFAs, wealth managers, and other investment firms to have adequate financial resources in place at all times. One aspect of the regulator's requirements is that many investment firms must take out - and continuously maintain - appropriate Professional Indemnity Insurance (PII).

In addition to its basic requirement that authorised firms have adequate financial resources and appropriate systems and controls in place to mitigate operational risk, and so protect their customers, the FCA also expects many regulated firms to back this up with Professional Indemnity Insurance.

The FCA stipulates that this must take the form of a PII policy with appropriate terms that provides cover against any claim for which the firm may be liable as a result of an act or omission by the firm itself or any person acting on its behalf. It also requires minimum indemnity limits.

The regulations also require that IFAs and other investment firms’ PII policies must not include conditions or exclusions that might exclude claims whose non-payment could negatively impact the adequacy of their financial resources.

All of which makes it absolutely vital for investment firms, financial advisers and wealth managers to take great care in choosing the right PII policies and the right provider. Only an insurance firm with specialist knowledge of what the FCA regulations require can be counted on to ensure your PII cover truly fits the bill.

As well as covering investment firms against professional negligence and civil liability claims from third parties, a PII policy covers defence costs and any expenses you may incur in defending a claim. It also covers any award made against you by the Financial Ombudsman Service (FOS).

If a complaint from a third party over alleged harm or loss caused by something your firm has done or failed to do turns into a claim, defending it can prove both costly and time consuming. Many investment firms have learned this the hard way before now - and with it the value of a good PII policy.

The right PII policy will relieve the expense and distraction of defending a claim, leaving you free to focus on what you do best, safe in the knowledge that your claim is being defended, and your interests upheld, by expert legal professionals.