How to complain if you've been misled

"Clear, fair and not misleading." That, says the UK's financial regulator, the Financial Services Authority (FSA), is what any marketing used to sell financial products should be. So some investors in Standard Life's £2.4bn Sterling Pension Fund feel short-changed. Many claim they had no idea that the fund had capital in "asset-backed securities" which have recently taken big hits. What's more, says Tom McPhail of Hargreaves Lansdown in The Daily Telegraph, it appears that, as late as April 2008, "Standard Life was still telling its customers that this fund was wholly invested in cash". Fortunately, for anyone who thinks they may have been misled by an investment firm operating in the UK, whether or not FSA authorised there's a way to seek compensation that doesn't involve going to court. It's called the Financial Ombudsman Service (FOS). The FOS says it handles more than a million enquiries a year and settles around 100,000 disputes. What's more it's free. Here's how it works.

First, be aware that many complaints are rejected. For example, you can't make a claim against a firm simply because an investment you hoped would rise in value fell instead. Provided you were warned at the time you bought typically via a "risk warning" you have no case. However, if you think you were not made properly aware of the risks, or were even misled, then you could claim. But watch out for the time limits you have six years from the date at which you can show you were missold a product. But you also have three years from the date you become aware that a product was not what you thought. This is useful for investors who were sold, say, a 20-year endowment policy in a bull market, on a promise it would pay off their mortgage only to find out they faced a shortfall on maturity when the stockmarket headed south later. Finally, if you have lost money because an FSA-authorised firm has gone bust, then it's the Financial Services Compensation Scheme you want rather than the FOS.

Step one for a valid complaint (ring the FOS on 0845-080 1800 if you are unsure) is to contact the original bank, broker or product provider that set up the deal. Written complaints letter or email are better than verbal ones. Keep copies of letters and make a note of whom you speak to and when. Then sit back the firm has eight weeks to consider your complaint and issue a "final response" indicating what, if anything, they plan to offer you.

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If you are unhappy with the response, or don't get one, fill in an FOS complaint form and lodge it with the FOS. You have a further six months to do this. The FOS will consider your case and typically reach a conclusion within six to nine months. Should the FOS agree with you they can force a firm to pay up to £100,000 in compensation. If you are still unhappy, you retain the right to sue the firm. But this can be costly, so check with a lawyer before going down this route.