Equitable Life will have to pay compensation to "late joiners" who signed up to buy investment and p...
Equitable Life will have to pay compensation to "late joiners" who signed up to buy investment and pensions between September 1998 and July 2000 as they were "misrepresented" about the financial risks of GAR-related claims, say findings published this morning on the Financial Ombudsman Service website.
Adjudications were issued on five "lead cases" concerning "GAR-related claims" this morning which categorically state Equitable Life is liable to pay compensation to certain classes of "late joiners" policyholders who pulled their investments out of the company BEFORE the Compromise Scheme became effective in February 2002 and are therefore not bound by the EL deal.
FOS officials stress that ONLY policyholders who left the company before the Compromise Scheme came into force will now be considered for compensation.
The five cases are all slightly different but tend to represent the wider number of complaints being put forward by policyholders and effectively follow the same pattern.
In these five "lead" cases, clients asked about the status of Equitable Life should it lose its House of Lords Appeal concerning the Hymans Judgment and the obligation on the firm to pay Guaranteed Annuity Rates.
Responses given by Equitable Life representatives in one way or another sought to discredit concerns about the financial risks to policyholders in with-profits funds.
Moreover, sales advisers argue they were acting with the best of intention as they had been referred to Customers Questions and Answers document as well as a Branch Managers' Market Briefing Note BMB2000/12 issued two days after the Court of Appeal judgment, which stated the mutual society's financial status would not be affected by judgments by the Court of Appeal or House or Lords.
After looking into these five cases, the Financial Ombudsman Service concluded that four of the five cases had been "induced into" purchase of their product "having relied on material misrepresentations" that advisers had made to them on behalf of Equitable Life, and "that Equitable Life is liable to compensate…for any loss".
In the fifth case, it was argued that the client had only been given information and not advice about the Society's status, but the FOS found in favour of the complainant, because she had been given advice on issues such as SERPS during the same conversation.
"I believe that [Ms E] would not have entered into her with-profits Personal Pension Plan with Equitable Life has she been aware of the salient facts. I believe that in failing to disclose [this] information, Equitable Life failed to take reasonable care in the provision of advice to Ms E and is liable to compensate Ms E for any loss," says the lead case Adjudication E.
At this stage, Equitable Life still has grounds to appeal the decisions under the terms of the Financial Ombudsman Service, as both sides can appeal. Anyone who does appeal must present new and unseen evidence to argue its case.
There are thought to be around 2,500 "late joiner" claims for compensation submitted with the Financial Ombudsman service, which will now be assessed on a case-by-case basis.
Class Law, one of the legal firms which has been pressing Equitable Life to pay compensation to its policyholder, says it will now pursue Equitable on behalf of its own clients.
"We are pleased with the judgments because we have many cases of a similar nature and we will be pressing for compensation," says Steven Alexander, partner at Class Law solicitors.
Details of the adjudications can be found on the FOS website, inside Equitable Life "FAQs". Scroll down to the third question, and links are provided to the five lead cases (see right-hand link).
Alternatively, to read the full adjudications, click thru the right-hand links to each document.
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