PROD 2.3 Agreements made in breach of product intervention rules

In relation to agreements entered into in breach of product intervention rules, section 137D(7) sets out that the rules may:

1. (1)

   provide for a relevant agreement or obligation to be unenforceable against any person or specified person;

2. (2)

   provide for the recovery of any money or other property paid or transferred under a relevant agreement or obligation by any person or specified person; and

3. (3)

   provide for the payment of compensation for any loss sustained by any person or specified person as a result of paying or transferring any money or other property under a relevant agreement or obligation.

Where a rule provides for a relevant agreement or obligation to be unenforceable, the relevant agreement or obligation would only be unenforceable if the sale of the product was made after the introduction of the rules and there was a contravention of those rules. Clients with products bought after the introduction of rules incorporating unenforceability provisions would generally need to seek redress through the usual channels of complaints to the firm and to the Financial Ombudsman Service, or legal action against the firm.

Arrangements made before the introduction of the rules would not be affected by the unenforceability and compensation provisions. Clients holding contracts made before these rules were in place would still be able to seek redress through the usual channels of complaints to the firm and to the Financial Ombudsman Service or legal action against the relevant firm. These clients would need to establish their claim to redress in the usual way, for example by demonstrating that the advice they received was unsuitable, or that they bought the product after receiving a misleading financial promotion.