Advisers within the collapsed Tenet network could face redress bills as the personal guarantees they provided remain legally binding, FT Adviser can reveal.
Although Tenet has been in administration since June, with the FSCS inviting claims, a business that is in administration is still trading and so remains a legal entity with all agreements still binding.
Advisers who joined the Tenet network were required to give personal guarantees around their advice, as well as having professional indemnity insurance, which commits them to paying the excess on a redress claim.
So for example, if a client wins redress from a firm that was an authorised representative of Tenet, of say, £20,000, the PI insurer may pay out £10,000 with the excess being £10,000.
The excess is paid by Tenet but when appointed representative firms signed up to be part of the Tenet network, they gave a guarantee that their firm would pay the excess.
So if a claim is made today, the administrators of Tenet would pay the £10,000 and then seek to reclaim that money from the advice firm.
FT Adviser understands Tenet being in administration does not change this.
The issue of personal guarantees is acutely relevant for many firms within the Tenet network as the administrators have, in conjunction with the FCA and FSCS, written to clients that have received DB transfer advice and suggested they “may” have received unsuitable advice and may have a claim.
Although those letters were sent by the administrator, Interpath Advisory, Tenet had received an S166 notice from the FCA which requires clients be contacted.
One adviser told FT Adviser he is “livid” at the fact his clients have been contacted and with the wording of the letter.
Interpath’s letter was sent both in the context of the S166 notice and also because as the administrator Interpath has a duty to identify both current and future creditors of the business.
Interpath declined to comment for this story.
David.Thorpe@ft.com
