The Financial Ombudsman Service has published its approach to calculating loss in financial advice disputes referred to it.
Financial advice disputes include claims about financial planning, stockbroking, managed investments, securities and derivatives.
FOS can only award compensation for losses in accordance with its Terms of Reference. In disputes lodged on or after 1 January 2010, FOS may award up to $150,000 compensation per claim to an applicant for “direct financial loss” and up to $3,000 for “consequential financial loss”. From 1 January 2012, the compensation cap for direct financial loss will increase to $280,000.
However, FOS may not award more than a total of $150,000 or $280,000 per claim (as the case may be) for direct and consequential financial loss combined.
Its approach to both identifying loss and measuring appropriate damages will depend on whether the adviser has:
- breached a duty (negligence) and/or contract or
- engaged in misleading or deceptive conduct: Section 12DA(1) of the Australian Securities and Investments Commission Act and section 1041H of the Corporations Act
- given inappropriate advice (Breach of section 945A(1) of the Corporations Act)
