Hargreaves Lansdown chairman Stephen Lansdown has protested to the FSA about the £30m financial burd...
Hargreaves Lansdown chairman Stephen Lansdown has protested to the FSA about the £30m financial burden that may fall on the financial services industry as a result of the proposed acquisition of Towry Law by AMP.
AMP's prospective offer for the UK intermediary group includes a deal with the Investors Compensation Scheme (ICS) to pay part of Towry Law's pension mis-selling liabilities, estimated at around £48m.
However, with the ICS and AMP agreeing to cap the company's liabilities at £18.5m, a burden of around £30m could be levied on the financial services industry through the ICS.
With Hargreaves Lansdown liable for part of this sum through the annual ICS levy, based on the company's number of registered individuals, Lansdown wrote to Howard Davies that the FSA and Investors Compensation Scheme should be 'ashamed of themselves to allow such a deal to go through.'
Towry Law's shares were suspended in February when it realised the scale of the pensions mis-selling liabilities it had inherited from Advizas, a company it purchased from Hogg Robinson in 2000.
Lansdown said that, on the face of it, Towry Law had made a bad acquisition, based on poor due diligence, and should either have to pay the liability itself or sue its professional advisers for it. With AMP proposing to offer 180p for each Towry Law share, valuing the existing share capital of the company at approximately £75.7m, Lansdown questioned why the £30m liability could not be taken from this initial sum.
'This would reduce the payments to Towry Law shareholders, which is unfortunate,' he said, 'but that is the price of investing in a poor company.'
Following the proposed acquisition, Towry Law will continue to operate under its own brand and will remain operationally independent.
Director of communications at AMP, Stephen Hoffman, said the company saw the acquisition of Towry Law as an each-way bet on depolarisation. 'If depolarisation continues, we will have greater opportunities to sell through Towry Law,' he said. 'If depolarisation stalls, there will be limitations better than best but we will still be able to sell products though the company not covered by the better than best advice regulation, such as general insurance.'
The FSA said that, in difficult circumstances, the prospective deal between the ICS and AMP looks like the best option for both the industry and consumers. An FSA spokesperson said: 'Towry Law could have cut Advizas off on discovering the liability and, in buying the intermediary, AMP is not required under commercial law to buy its liabilities.'
The Financial Services Compensation Scheme, of which the ICS is a subsidiary, said that if it had not done this deal with AMP, it would have had to declare Advizas in default and the entire £48m liability would have fallen on the ICS.
F&C IT's 150th anniversary
First meeting for Powell
Red tape and tech driving consolidation
2019 Survey opens in June