Lautro, the life insurance regulator, has fined LAS a total of pounds 145,000 and ordered it to pay pounds 16,000 costs for three breaches of its rules. By far the most serious was LAS's failure to control and organise its affairs in a responsible manner, which led to the company taking on 35 salesmen without making adequate checks to ensure they were fit and proper.
Lautro believes there were serious flaws in the management culture at LAS, with compliance staff lacking the authority to carry out their responsibilities. A formal investigation found that 'final authority for recruitment rested with regional sales directors who gave insufficient weight to the views of the compliance department, who were generally ignored'.
The criticism casts a shadow over Richard Buchanan, the former LAS boss who this week joined National & Provincial Building Society as director of life assurance, pensions and investments, making him responsible for its life insurance arm.
Lautro routinely passes to the Department of Trade and Industry the relevant papers on its investigations into companies where it finds fault. The DTI is responsible for ensuring the directors of life insurance companies are fit and proper.
An N&P spokesman said Mr Buchanan's appointment at N&P Life had already been cleared by the DTI, and yesterday's criticism did not create a problem. Mr Buchanan was not available for comment.
Gavin Stewart, deputy managing director of Britannia Life, said his company had known of the impending Lautro fine when it took over LAS in a pounds 25m deal last autumn. Internationale-Nederlanden, the Dutch insurer that was LAS's previous owner, indemnified Britannia Life against the fine.
Britannia Life disbanded LAS's 200-strong sales force last November, so the regional sales directors have left. 'The people who remain with us have not been tainted,' Mr Stewart said.
Mr Stewart said no compensation had to be paid to the few hundred investors who were sold policies by the 35 salesmen recruited by LAS without proper references.
According to Lautro's charges, the inadequate controls date from April 1990 and continued until September 1992. Unsatisfactory procedures continued despite being criticised during a 1990 inspection.
LAS's compliance officer has assured Lautro that 'he now has sufficient authority and resources to discharge his duties'.
LAS was also fined pounds 10,000 for an alarmist advertising campaign in late 1992 that made misleading and irrelevant references to the Maxwell scandal. Lautro said the campaign 'gave the impression that the millions of policies to which the advertisements referred were fraudulently sold'. John Allison, the LAS marketing boss behind the campaign, recently joined Ivory & Sime, the Edinburgh investment managers.
Lautro has issued new guidance to life insurers on dealing with investors caught up in the pension transfers scandal. Where investors have inadvisedly left or transferred benefits out of a company pension scheme within the past year, Lautro advises that 'immediate action should be taken to advise the client appropriately and, if necessary, restore the situation by arranging for the client to be readmitted to the occupational scheme if possible'.Reuse content