Section 138D of the Financial Services and Markets Act 2000 gives a private person who suffers loss as a result of an authorised person's contravention of an FCA rule a right to sue for damages, subject to the defences and other incidents applying to actions for breach of statutory duty. A rule made by the PRA may provide that its contravention is actionable at the suit of any person who suffers loss. If FCA rules so provide the right does not apply to a specified provision, and in prescribed cases a contravention actionable by a private person is also actionable by a person who is not one.
Its statutory ancestor was section 62 of the Financial Services Act 1986. Its direct predecessor was section 150 of FSMA 2000, renumbered as section 138D when Part 9A was substituted for sections 138 to 164 by section 24(1) of the Financial Services Act 2012. It took effect for specified purposes on 24 January 2013 and otherwise on 1 April 2013. Older judgments refer to section 62 or section 150.
'Private person' has the meaning prescribed by the Financial Services and Markets Act 2000 (Rights of Action) Regulations 2001 (SI 2001/2256). Broadly it means an individual, unless the loss was suffered in the course of carrying on a regulated activity, and it does not include a government, a local authority or an international organisation. A fiduciary or representative of a private person may also sue. The boundaries have been litigated, and whether a corporate claimant qualifies is not always obvious.
The right is not general. Section 138D(5) excludes several categories of rule, including Part 6 rules, rules under section 137O (the threshold condition code), rules under section 192J, rules under section 64A (rules of conduct) and a rule requiring an authorised person to have or maintain financial resources. Each sourcebook carries a schedule of actionable rules. COBS Schedule 5 records that most COBS rules are actionable by a private person, that rules carrying the status letter 'E' are not, and that record-keeping rules made for SYSC 9 purposes have had the right removed. Under COBS 4.2.6R a firm that takes reasonable steps to comply with the fair, clear and not misleading rule does not expose itself to a section 138D action for contravening it.
A section 138D claim is a customer's civil claim for breach of statutory duty, not a regulatory penalty, and that distinction drives the cover analysis. Professional indemnity policies for advice firms generally respond to civil liability arising from professional business and exclude fines and penalties, so the damages claim ordinarily falls inside the policy while a regulatory penalty for the same breach does not.
Limitation also runs differently. The courts have treated breach of statutory duty as governed by section 2 of the Limitation Act 1980, with six years running from accrual, and as outside the latent damage extension in section 14A, which applies to actions for damages for negligence. Separately, a rule breach does not automatically generate a co-extensive common law duty, a point addressed in the entry on Green and Rowley v RBS.
Keep evidence of compliance with actionable rules rather than assertions of it, because a section 138D claim is proved by reference to the rule that was contravened, and the file is the evidence. Eligible complainants can also use the Financial Ombudsman Service, which does not require a rule breach at all. On cover, check the civil liability wording is not narrowed to negligence alone, and that the excess is absorbable if one breach affects a whole book rather than one file. Aggregation and multi-client exposure are discussed in the guide to professional indemnity insurance for IFAs, and the parallel position for regulated intermediaries in the guide for insurance brokers. See also the entry on Adams v Options SIPP on the advised and execution-only boundary. Apex Insurance Brokers arranges cover with FCA-authorised insurers and is not an insurer.
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.