Technical forum note: I have had to introduce a space to disable the quoted links, as I am a first time poster, please copy and paste links into your browser and delete the surplus spaces after the h's. Most links are to the FSA Handbook or Wikipaedia. ------------------------------------------------------------------- I am posting this here for two reasons: (1) the case is live and I am interested to hear any counter argument to the arguments I have put forward. I suspect my letter has been sent to legal dept as there has not been any reply in the first instance, whereas up to now the client received replies almost immediately. (2) seems to me that there is a perfectly good case for shareholders having consumer protection, where they meet the conditions I describe below and therefore these arguments may benefit others in the future. By way of emphasis, this is all about whether a shareholder can be an eligible claimant as a consumer where a bank has wronged the company in whom the shareholder has shares. I am not addressing anything else, such as whether the claim is valid. Just the indirect claim, that's the key here - and it is complicated. I have removed all the names except my own and I hope kept the details confidential so that it is the subject matter that is here published for general consumption by consumers, for whose benefit I have written this post. My client received the following response from the FOS concerning whether shareholder can make a claim about the company's bank's actions. Sounds like an obvious "no" does it not? This is "obvious" because of the principle of "privity of contract", and because it just sounds somehow sensible. Here is the FOS response: So one might think, that's the end of it. I was presented with this and decided to have a look. Here is my response: Financial Ombudsman Service Date 12 October 2010 Dear Sirs, Re: clientname NAME CHANGED and case refs removed. By way of introduction I am a Chartered Accountant of 30 years in general practice, and the Clientname's circumstances were brought to my attention by mutual acquaintances. While insolvencies generally trace back to tales of business woe that might sometimes have been avoided, one does not expect to find a bank being an underlying cause of any aspect as has been described to me. As such I have taken an interest by preparing and writing this letter, for no fee. Having read your earlier correspondence I can see that this matter has persisted for some time. I applaud your continuing patience and ask if you will please give your consideration to my review on behalf of the Clientnames generally. In addition to that, I would like to express my mild surprise at the conclusion I have reached. Naturally I sympathise with the Clientnames, but I am accustomed to clients discovering regulations are not as they might like and then having to deliver that news. So in this case my reading has reached an unexpected conclusion. With that said, recognising there may be authoritative text I have not yet seen that would cause me to revise my opinion and in the light of your expertise and experience in these matters I offer the following discussion. INTRODUCTION My discussion in support of the following statements is presented below. (1) "Company officers, consultants and employees are all acting for purposes inside their trade, business or profession per the glossary for "consumer" at 2.7.3 whereas this not the case for every shareholder". (2) "In addition, a consumer is unique in being eligible to make a complaint where the relationship is indirect. Privity of contract does not instantly apply, or rather is dis-applied by the definition." Privity of Contract Within (2) above I mention "privity of contract". This concept underpins contract law not just in the UK, but across our planet. I have added this section to provide emphasis of just how important, nay, fundamental an alteration to our normal understanding of the application of our laws is effected by allowing complaints to cover indirectly affected consumers. Such an alteration means that our standard evaluations and assumptions require careful re-examination in such cases. h ttp://en.wikipedia.org/wiki/Privity_of_contract AUTHORITIES - from the online FSA Handbook. DISP 2.7 Is the complainant eligible? h ttp://fsahandbook.info/FSA/html/handbook/DISP/2/7 and in the detail of the glossary for "consumer": h ttp://fsahandbook.info/FSA/glossary-html/handbook/Glossary/C?definition=G210), Throughout there is a distinction between a "natural person,(and) a legal person...". The word "person" is used to include both, whereas "natural person" means a human being; so the distinction clearly appears to be intended by the draughts-people. Definitions are always hyper text linked, so where there is no special definition, the general English language can reasonably be assumed to apply. The link to "person" is here: h ttp://fsahandbook.info/FSA/glossary-html/handbook/Glossary/P?definition=G869 THE RULES 2.7.6 States that the complaint must arise from 1 or more of 14 types of relationship with the bank (respondent). Relationship Type no 2 within 2.7.6 states that the bank (respondent) must be a potential payment service provider or potential supplier, to the complainant. Direct debits are included as payment services here: h ttp://fsahandbook.info/FSA/glossary-html/handbook/Glossary/P?definition=G2617 2.7.6 uses the word "complainant" in each of the 14 relationships. It occurs to me that the undefined word “complainant” encompasses every conceivable category of complainant including both "ineligible complainant" and "eligible complainant", 2.7.6 is NOT concerned with whether or not the complainant is otherwise eligible, but purely with the type of the relationship. For the record I can not offer suggestions for possible types of complainant beyond eligible or ineligible. If the type of relationship is not listed, then an eligible complainant becomes ineligible. However, the complainant is as defined elsewhere, including consumers and indeed others. 2.7.3 States that a consumer is an eligible complainant provided they are not engaged in the relationship in any business capacity, which is worded as: “any natural person acting for purposes outside his trade, business or profession.” 2.7.3 also states at para 2 “a person” at para 2b “ who has rights or interests which are derived from, or are otherwise attributable to the use of, any such services by another person; “. NOTE “person” includes a company. This so states that the link between the consumer and the respondent does not have to be direct, it means the consumer can be a person who has rights or interests derived from or otherwise attributable to the use of services by another person. See "privity of contract" section above for why this is fundamental. PUBLIC INTEREST My understanding is that the complainant is, or can be, the consumer and not necessarily the "person" in the middle. My, or perhaps "the" point being that the complaint has life through the consumer regardless of the existence or otherwise of "another person" in between. So if a bank effectively unfairly disadvantages a consumer shareholder by putting that "other person" out of business by maladministration: there is proper accountability to the consumer. Which one might consider is as it should be, banks should be accountable and take responsibility for their actions just like everyone else, and so far in this case they are evading the issue - my sympathetic opinion of course. It occurs to me that bank maladministration in these circumstances is rare and therefore this issue could be unique in the life of the FOS to date. I say "rare" because one would hope that banks usually have perfectly good reasons for the closure of businesses and are not the cause of it through maladministration: in this case agreeing one thing and then doing the opposite. REVIEW The glossary uses the verb "to act" in the phrase "acting for purposes". Given the legal persona of a company, shareholders are clearly neither employees and officers nor acting by virtue of being a shareholder within any trade, business or profession. Of course a shareholder can be any of these, but that is not the same thing. In life we all act in many different capacities. So for example acting as a stockbroker or other trader in securities could be for purposes inside their trade or profession etc, but that requires skills for the trading of shares. A shareholder does not, indeed can not "act" other than in general meetings of members of a company where they exercise oversight of their investment. Outside that investor act (being none of trade, profession, business, vocation, employment or office) a natural person shareholder simply exists as a consumer. I do not believe shareholder meetings would/should be categorised as acting within a trade, profession, business, vocation, employment or office because they are enacting oversight of their investment, which is not a trade, profession, business, vocation, employment or office. Again a professional exercising their profession would be different and make that shareholder not a consumer. Attendance at any company AGM will show the presence of large numbers of consumers side by side with the professionals. Clearly consumer shareholders have rights and interests (per the glossary of defined terms) because that is the very nature of shares, and this does not amount to acting in business (to save repeating the list again). Clearly the professionals are expected to know what they are doing and consumer protection is not extended to them. Most consumers being unaware will not be persuaded by the actions of a bank and so this situation will rarely arise, indeed taken with that, the banks one hopes do not then maladminister the matter to boot. CONCLUSION I am particularly interested to hear what you think as it occurs to me that seeing a shareholder as a consumer may be intuitive for the general public and perhaps the only real issue in this case. I cannot, however, find anywhere any text that excludes shareholders impliedly or expressly by definition, including a short review of F.O.S. Ltd newsletters. Ordinary shareholders are not in business, they are investors, which statutes expressly distinguish from trading in business, professions, vocations or employments or offices. Case law abounds with argument about the distinguishing features. From the above my conclusion is that if the shareholder can indeed be properly classified as a consumer, then the complaint can be available for you to pursue via the indirect link of "another person". I do hope you find my arguments cogent and with due respect for your positions and as such I remain Yours faithfully, Anthony Mellor F.C.A. Chartered Accountant Working to Professional Standards T +44 (0)121 314 4750 INSPIRING CONFIDENCE