Legal & General locks horns with City watchdog over mis-selling fine

Click to follow
The Independent Online

The first setpiece battle between the Financial Services Authority and a major financial services company begins today as Legal & General, the UK's fourth-largest life assurer, appeals against a £1.1m fine levied by the City watchdog over the alleged mis-selling of mortgage endowment policies.

The first setpiece battle between the Financial Services Authority and a major financial services company begins today as Legal & General, the UK's fourth-largest life assurer, appeals against a £1.1m fine levied by the City watchdog over the alleged mis-selling of mortgage endowment policies.

The Financial Services and Markets Tribunal hearing is scheduled to last six weeks and is set to generate multimillion-pound legal bills on both sides.

The FSA has imposed fines on five other companies - Royal Scottish Assurance, Winterthur Life, Abbey Life, Scottish Amicable and Royal & SunAlliance - for endowment mis-selling over the past four years. However, L&G is the first to appeal against such a penalty.

Although most of the fined companies have said privately that they feel their penalties were unfair, they withheld from making an appeal for fear of jeopardising their relationship with the regulator.

A win for L&G, which is confident it has a cast-iron case, could encourage more companies to challenge the FSA's enforcement division.

The L&G hearing kicks off what could be a difficult week for the FSA, with a decision on another tribunal case - involving David "Dotty" Thomas, one of the architects of the split-capital investment trust sector - also due to be announced within the next few days. The FSA is expected to lose the case, which concerns its decision to block Mr Thomas's recent application for regulatory approval without having any concrete evidence of wrongdoing against him.

The restart of the FSA's tribunal against Paul "The Plumber" Davidson - which embarrassingly had to be disbanded this summer after fears that members of the tribunal had been prejudiced - is due to restart next Monday.

Last week, John Tiner, the chief executive of the FSA, prepared for a likely loss in at least one of the high-profile cases coming up, in a speech given at an FSA enforcement conference. "While I expect that we shall continue to win most of our cases, it is inevitable that from time to time we will lose before the tribunal," he said.

"I would not find that a failure of the regulatory system. On the contrary, if we never lost a case before the tribunal, that would suggestwe were failing in our public responsibilities because we were not taking on the complex cases that we have a responsibility to investigate."

Comments