The Financial Services Authority says it has been vindicated in its actions against Legal & General over mortgage endowment mis-selling because the firm was found to have mis-sold policies.
A statement issued yesterday following publication of the Financial Services and Markets Tribunal report - into the row between L&G and the FSA – says the tribunal upholds the case that L&G’s sales procedures were defective and finds “these procedural defects were have caused or contributed to mis-sales”.
The FSA continued by pointing out oral evidence from 13 L&G customers and revealed at least in these specific cases, eight policies had been mis-sold and of this small collection of cases, “this represented potential mis-sales of 62% in this group of customers”.
Before the tribunal case began, the central argument in the FSA’s case for imposing the £1.1m fine had related to the procedures adopted by L&G between 1997 and 1999 for the sale of its Flexible Mortgage Plan to 41,000 “low risk” customers, as the FSA argued the level of this mis-selling was significant while L&G did not accept its procedures were defective or any mis-selling therefore resulted from procedural defects.
Since the report was published yesterday, however, the FSA says it will now give “careful consideration” to the tribunal observations on its handling of the case and will look to improve its own procedures as a result of the criticism directed at the FSA by the tribunal committee.
The FSA points out tribunal comments suggesting the regulator was not justified when it said the sample of L&G cases studied reflected a pattern of general mis-selling.
That said, the FSA again reiterated feedback from the tribunal which said the FSA was entitled to take enforcement action if L&G was not thought to be co-operating with FSA enforcement procedures.
“If L&G was not co-operating in securing a review which could be used effectively for enforcement, it was for the FSA to impose a suitable exercise,” the tribunal stated in its report.
Based on its response the FSA appears to suggest it sees this argument as grounds for taking action against companies who are not thought to be complying with FSA requirements, as the regulator says it “intends to use its powers in comparable circumstances in the future to avoid such difficulties arising”.
Since the report was published, consumer-led organisation have also added their weight to the condemnation of Legal & General, as the Financial Services Consumer Panel also focused on the fact defective sales procedures at had led to mis-selling and backed calls for the FSA to flex its muscles further when seeking evidence of mis-selling.
Ann Foster, chairman of the FSCP said:
"The most important finding is that 41,000 L&G Flexible Mortgage Plans were sold between 1997 and 1999. As the Tribunal found that L&G's sales procedures were defective, it is imperative that L&G review those sales to ascertain how many were missold, and compensate consumers accordingly."
The FSCP also said it was “pleased to see the FSA being encouraged to use its powers more forcefully to obtain the evidence they need to check up on potential mis-selling by financial services firms”.IFAonline
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