The Financial Services and Markets Tribunal has just released its judgement on the case involving a mis-selling charge levied against insurer Legal & General.
While statements from both parties - L&G through a regulatory news service statement to the London Stock Exchange, and the FSA through its website - seek to put a gloss on the Tribunal's ruling, it does look as if both sides have had their knuckles rapped.
The Tribunal found indeed there were cases of mis-selling, but that the number assessed in the L&G Endowment Sales Review was not sufficient for the FSA to automatically assume mis-selling was sufficiently widespread to support its decision to impose a £1.1m fine on the company.
Accordingly, in the crucial paragraph of its 102 page document, the Tribunal says:
"FSA's case to the Tribunal is that there were 60 mis-sales out of the 250 cases in the ESR and that this pattern can be taken as representative of sales of FMP's to low risk customers generally. We find that there were 8 mis-sales with potentially 14 more. We find 25 cases too unclear to decide. We find 4 cases not to be mis-sales with 9 more potentially in the same category. We do not consider that this pattern in the 60 can be taken as representative of sales to to low risk customers generally. Common sense suggests that the defects in procedures will have caused mis-sales beyond the 8 established. Except to this limited extent the mis-selling case fails."
Tribunal findings suggest mis-selling did take place, but the FSA could not extrapolate from the limited number of cases in the representative sample such mis-selling was widespread, partly because the FSA's ESR questionnaire process - used to assess how many of the sample cases were missold - is described by KPMG as "poorly designed and unfit for its purpose".
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