Financial advisers occupy an unusual position in English law. A single piece of advice may give rise to three overlapping causes of action: breach of the retainer in contract, breach of the common-law duty of care in tort, and breach of statutory duty under section 150 of the Financial Services and Markets Act 2000. For an FCA-authorised firm placing professional indemnity cover, understanding how these routes interact drives the limitation position, the FOS route, the scope of insurable liabilities, and the way notifications should be handled.
The House of Lords in Henderson v Merrett Syndicates Ltd [1994] UKHL 5 confirmed that a professional owing a contractual duty to a client may also owe a coextensive duty of care in tort, and the claimant is entitled to rely on whichever cause of action is more advantageous. Lord Goff's reasoning was that the assumption of responsibility test is not displaced by the existence of a contract; the two duties run in parallel. For a fuller treatment see the linked entry on Henderson v Merrett and concurrent duties.
Applied to financial advisers, this means that a client who received advice under a client agreement is not confined to a contract claim. The tort route remains open, and, since 2000, the statutory route under FSMA has run alongside both.
Section 150 of FSMA 2000 provides that a contravention by an authorised person of a rule made by the FCA is actionable at the suit of a private person who suffers loss as a result, subject to the defences applicable to actions for breach of statutory duty. In substance the section creates a statutory tort. The Court of Appeal in Green and Rowley v Royal Bank of Scotland plc [2013] EWCA Civ 1197 examined the interaction between the s.150 route and the common-law duty of care in an interest-rate hedging context, holding that the existence of a regulated conduct-of-business framework did not, of itself, generate a wider common-law duty, but confirming that the statutory route was available and distinct.
The statutory tort matters because the rulebook in play — particularly COBS 9 on suitability and COBS 4 on financial promotions — imposes obligations that are more prescriptive than the common-law duty. A COBS 9 suitability failure may be established without the claimant proving the full Bolam-style breach that the common-law route would require. In Barclays Bank plc v Grant Thornton UK LLP [2015] EWHC 320 (Ch), the analysis of scope of duty and reliance in a professional context reinforced how carefully the courts distinguish between the different bases of claim.
For an IFA claim the three routes typically produce the same measure of loss but different limitation periods and different procedural gateways. Contract limitation runs six years from breach under section 5 of the Limitation Act 1980. Common-law tort limitation runs six years from damage, with the section 14A extension of three years from the date of knowledge — see the linked entry on Limitation Act 1980 s.14A. The statutory tort under s.150 attracts the same limitation regime as any other action for breach of statutory duty, which aligns with the tortious six-year and s.14A three-year framework.
The Financial Ombudsman Service operates a separate jurisdictional gateway. DISP 2.8 sets the primary limit at six years from the event complained of or, if later, three years from when the complainant became aware, or ought reasonably to have become aware, of cause for complaint. FOS is not bound by strict court limitation and can consider complaints outside those periods in exceptional circumstances.
Worked example — illustrative only. An IFA advises a client in June 2018 to transfer a defined-benefit pension into a self-invested personal pension. In early 2024 the client, having read coverage of the BSPS redress exercise, commissions a comparative valuation which shows a substantial loss against the DB benefit foregone.
The practical consequence is that the client who is out of time in contract still has three routes open into 2027. The PI carrier, and the broker who placed the cover, need to factor in that BSPS-era and pension-freedoms-era advice can generate notifications many years after the advice was given.
Unlike solicitors, financial advisers do not sit under a single Minimum Terms and Conditions regime; MIPRU 3 sets the FCA's PI requirements for insurance intermediaries and personal investment firms, with limits calibrated to income and business type. For firms with BSPS or DB-transfer exposure, the cover in force at the time of notification — not at the time of advice — will generally respond, because IFA PI is written on a claims-made basis. That timing risk is one of the reasons careful placement, run-off arrangements and honest circumstance notifications are central to the advice-firm PI market. For Apex's approach to advising financial advisers on their PI programme see the pillar guide at IFAs and PI insurance — the 2026 UK guide.
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.