Q&As

What kind of regulatory framework exists for automated bots, or ‘robo-advisers’, offering financial advice? Does a person have a claim in the tort of negligence if they are misadvised by one?

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Published on LexisPSL on 06/09/2021

The following Financial Services Q&A provides comprehensive and up to date legal information covering:

  • What kind of regulatory framework exists for automated bots, or ‘robo-advisers’, offering financial advice? Does a person have a claim in the tort of negligence if they are misadvised by one?

What kind of regulatory framework exists for automated bots, or ‘robo-advisers’, offering financial advice? Does a person have a claim in the tort of negligence if they are misadvised by one?

While robo-advisers are not subject to a specific or unique regulatory framework, the Financial Conduct Authority (FCA) published a statement in May 2018 saying it expects such services to meet the same regulatory standards as traditional advisory services. The FCA states this means that automated investment advisory services should as well take a ‘proportionate approach to information gathering while maintaining the appropriate level of client protection’.

Although this has never been explicitly stated by a court in England and Wales, this might mean that the test for negligence against an automated adviser would be analogous to that of a normal financial adviser. As established in Bolam v Friern Hospital Management Committee, the standard of care owed by a professional must be ‘in accordance with a practice of competent respected professional opinion’.

The standard of care the courts expect from financial advisers was

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