The Bolam test originates in Bolam v Friern Hospital Management Committee [1957] 1 WLR 582, in which McNair J directed that a professional is not negligent if they have acted in accordance with a practice accepted as proper by a responsible body of opinion in the same field. The test was refined in Bolitho v City and Hackney Health Authority [1998] AC 232, which added that the responsible body of opinion must withstand logical analysis. The Bolam standard has long been applied beyond medicine to other skilled professionals, including financial advisers, where the cause of action is negligence at common law.
For an FCA-authorised independent financial adviser, Bolam remains the starting point in any civil claim issued in the High Court or county court for professional negligence. The court asks whether the recommendation would have been accepted as proper by a responsible body of competent IFAs at the time, judged on the information reasonably available then. That common-law standard runs alongside, not instead of, the regulatory framework.
Since 2007, the FCA's Conduct of Business Sourcebook has prescribed a detailed suitability framework. COBS 9 (for non-MiFID business) and COBS 9A (for MiFID and insurance-based investment business) require an adviser to obtain the necessary information about the client's knowledge and experience, financial situation including ability to bear loss, and investment objectives including risk tolerance, before making a personal recommendation. A suitability report must be issued.
The practical effect is that the prescribed regulatory floor narrows the space in which a responsible body of IFA opinion can credibly disagree. Where a rule is specific, no responsible body of practice can defensibly fall below it. The court in Loosemore v Financial Concepts [2001] Lloyd's Rep PN 235 treated the regulator's rules as significant evidence of the standard of care, even where the cause of action sounded in negligence. In Beary v Pall Mall Investments [2005] EWCA Civ 415, the Court of Appeal considered the scope of an adviser's duty to advise on alternatives, again reading regulatory expectation into the common-law duty.
The Financial Ombudsman Service does not apply Bolam. Under section 228 of the Financial Services and Markets Act 2000, FOS determines complaints by reference to what is, in the ombudsman's opinion, fair and reasonable in all the circumstances. The ombudsman takes the FCA Handbook and relevant law into account but is not bound to the responsible-body test. FOS has on numerous occasions found a recommendation unsuitable on a fair-and-reasonable basis where a court applying Bolam might have accepted the firm's expert evidence as supporting it.
The clearest illustration is the British Steel Pension Scheme (BSPS) cohort and the wider defined benefit transfer market. COBS 19.1 contains a presumption that a transfer from a safeguarded benefit is unsuitable unless contrary advice can be demonstrated to be in the client's interests. FOS BSPS decisions have repeatedly upheld consumer complaints where the firm's file showed process compliance but the ombudsman concluded the outcome was not fair and reasonable. The FCA's redress scheme for BSPS advice followed.
A hypothetical IFA recommends a DB transfer in 2019. The file shows a completed fact-find, an Appropriate Pension Transfer Analysis, a documented attitude-to-risk discussion, and a suitability report. The firm's expert at trial gives evidence that a responsible body of IFAs would have made the same recommendation on those facts. The court, applying Bolam, dismisses the negligence claim.
The same client complains to FOS. The ombudsman, applying section 228, concludes that on these facts the recommendation was not fair and reasonable and directs redress under the FCA's published methodology. Both outcomes can sit on the same PI claims file. PI insurers will typically be on risk for the FOS award and the costs of defending the court claim, subject to policy terms and the position on aggregation.
An FCA-rule breach can found a private right of action under section 138D FSMA 2000 for a private person, and a Bolam-style negligence claim can be pleaded in the alternative. The same conduct can produce a finding of breach under the rules and a finding of negligence at common law, or one without the other. For PI notification, both heads need to be reported under the firm's policy where the wording requires notification of circumstances that may give rise to a claim.
Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Firm reference number 724952. This entry is general information, not advice on any particular policy.