L&G suspends 14 staff after alleged abuses over dealings

Click to follow
The Independent Online

Legal & General, one of the UK's largest providers of retail investment products, has suspended 14 staff as part of an investigation into alleged abuses relating to dealings in unit trusts worth billions of pounds. The disclosure poses another setback to hopes that private investors might regain an appetite for stock market investments.

Legal & General, one of the UK's largest providers of retail investment products, has suspended 14 staff as part of an investigation into alleged abuses relating to dealings in unit trusts worth billions of pounds. The disclosure poses another setback to hopes that private investors might regain an appetite for stock market investments.

The investigation centres on the group's Cardiff office, which handles the administration of billions of pounds' worth of orders to buy and sell unit trusts. Senior managers are among the 14 staff suspended last Monday, although none are thought to include directors of the company.

L&G said yesterday that staff had been suspended "pending investigations into possible irregularities".

It said in a statement: "The focus of the investigation is the record of personal investment in L&G funds and whether that is in accord with internal rules and procedures. The investigations do not involve customer administration and no customer money is at risk."

The inquiry is looking at whether employees with privileged powers in the administration department took advantage of movements in share indices, such as the US Nasdaq index, in their own personal trading. The department is believed to be responsible for the final fulfilment of unit trust orders, the investment funds that are the principal component of Isas and Peps.

L&G is understood to have calculated that it has lost £20,000 due to the alleged behaviour. It is unclear how long L&G's inquiry will take. No criminal charges have been brought and the police have yet to become involved, although L&G has alerted the City watchdog, the Financial Services Authority, to the situation.

A spokesman for L&G said the company had already tightened up internal procedures and was conducting a review of how to further improve controls, although it was impossible to devise a fail safe set of rules. "You expect people working in financial services, more than any other industry, to have the utmost integrity. The bottom line is that we have to rely on the integrity of our staff to do the right thing," he said.

It is not clear whether the alleged abuses of position were in strict breach of L&G's internal guidelines, or rather contravened their spirit, one source said.

The damaging disclosures come at a difficult time for L&G and for the battered retail investment industry as a whole. Sales of unit trusts have collapsed this year following the prolonged stock market downturn that followed the collapse of the technology share boom in April last year, and L&G's own shares have fallen 15 per cent over the past 12 months.

The fund management industry's reputation was further dented last week when it emerged that Brunswick, the City PR firm that represents New Start Asset Management, had passed to several journalists a handout containing negative comments about its client's rival, Jupiter Asset Management. New Star has stood out among its peers by advertising aggressively throughout the downturn in a bid to attract dissatisfied investors away from the incumbent asset managers.

The Association of Unit and Investment Trusts, the umbrella body for the industry, was unavailable for comment yesterday.

Comments