The AFCA Approach to determining compensation in complaints against Financial Advice Firms where the Responsible Entity of a Managed Investment Scheme has become insolvent

Where inappropriate financial advice has been provided, the purpose of the compensation is to place the complainant in the financial position they would have been in if the financial advice firm had provided appropriate financial advice (i.e. [...] The AFCA Approach to determining compensation in complaints against Financial Advice Firms where the Responsible Entity of a Managed Investment Scheme has become insolvent Page 5 of 9 3 Case study 3.1 Case study on a complaint against a financial advice firm and a failed MIS The complainant says the financial advice firm gave them inappropriate advice in advising them to invest in a growth profile. [...] The AFCA Approach to determining compensation in complaints against Financial Advice Firms where the Responsible Entity of a Managed Investment Scheme has become insolvent Page 6 of 9 Option 3: The decision maker could find that the financial advice firm breached its obligations to provide appropriate advice and act in the best interests of the complainant and this breach caused loss to the compla. [...] Assuming no contribution is found on the complainant’s part, the decision maker would assess loss on a “But for” basis, i.e., but for the failure of the financial advice firm to provide appropriate advice and act in the best interests of the complainant, what position would the complainant have been in? The financial advice firm is liable and the failure of the two MISs is taken into account as pa. [...] In these circumstances, the financial advice firm would be responsible for the losses caused by the failure of the two MISs in the sense that they are part of the actual loss calculation.