The dramatic news today about dawn raids and nine arrests made by the SFO in London and Reykjavik at the culmination of a year-long investigation into Kaupthing’s collapse will, regardless of the outcome of the criminal enquiries, have little bearing on any liabilities faced by advisers for complaints from clients who lost money in the collapse of the Icelandic bank.

It will likely be years before any criminal trial. Even if such a trial eventually concluded that Kaupthing’s collapse was due to criminality, advisers could still be found liable by the FOS if their advice was unsuitable. In law, we would confidently argue that such an adviser’s recommendation to invest in Kaupthing cannot have caused the losses if they arose from unforeseeable criminality – the ‘causation defence’. However, in the infamous case of IFG Financial Services v (i) FOS and (ii) Mr & Mrs Jenkins, the High Court confirmed that FOS is “free to make an award which differs from that which a court applying the law would make…”, and so (as in IFG’s case) an adviser could be found liable for losses arising from an unsuitable recommendation even if the losses were in fact caused by unforeseeable wrongdoing by a third party - even though such a conclusion is contrary to law!