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FSA: Firms should consider redress over traded life policies

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The FSA says firms that have recommended traded life policy investments should consider carrying out a past business review to assess whether redress should be paid to investors.

The regulator has published a guidance consultation on TLPIs today which sets out the FSA’s aim of banning the marketing of the products to UK retail investors.

The total UK market in TLPIs is estimated to be worth around £1bn. The FSA says approximately half of this money is held in TLPIs that are already in difficulty.

The FSA estimates that at least 1,000 distributor firms were involved in the sale of TLPIs. The FSA estimates the cost of reviewing past TLPI sales to be between £200 to £300 per case where firms are using their own compliance staff.

The FSA says: “There is a risk that any reviews of sales by firms and subsequent payment of redress may lead to problems with the ongoing viability of some firms.”

It says the risks posed by TLPIs means firms that recommended these products may be impacted by customer claims for redress regardless of the guidance.

However the FSA admits today’s guidance may accelerate the failure of firms that sold these products.

The FSA adds: “There is a risk that publishing this guidance may lead to a run and, if that jeopardises the viability of the product, consumers may lose money as a result.”

The FSA says it has found evidence of one TLPI where average holdings per investor were £36,000.

It also says its work with one TLPI suggests that investors may only get back 15 per cent of their investment if the product were to fail.

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Readers' comments (10)

  • Listen, just to speed the process up let`s get the FSA to tell us to advise all our clients to seek redress for all products sold up until end of Decemebr 2011 and starting from whenever the insurers first dreamed up investment products! Will save alot of time and in Januray 2013 the FSA will have no firms to regulate, perfect!

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  • Hugo

    As crazy as it may may sound I tend to agree with you. I would go a step further I think the whole financial industry should give all the money back to all our investors and we line up single file and jump off the nearest cliff. To rid the country of our kind !!!

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  • Would the last person out please close the window.

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  • Perhaps we should send example complaint letters to all clients, outlining potential past and future grounds for a complaint.

    This would not be restricted to issues an IFA had any control over of course, but a carte blanche approach to ensure the consumer has the best chance of receiving compensation.

    We could also mention that the FSA are not responsible for anything bad ever and that everything is the fault of the advising company - just to make sure the record is straight.

    I believe this should also include poor fund performance where the investor was fully aware of the risks and perhaps fraud too - especially when the FSA could have prevented it from happening.

    If there is any money left over when the clients have been paid out, we can simply write a cheque to the FSA to make sure that Hector and his cronies don't go short of helicopter flights from airports and 5 star hotels to stay in.

    Once this excercise is complete, all IFA firms should shut down and ask their clients to visit their nice friendly bank for "advice" - just as the FSA want them to do.

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  • Don't worry Hector will get the window then send our estates the bill!

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  • Good to see the FSA quick off the mark once again. Anyone heard about that Keydata? Meant to be problematic.

    I look forward to the FSA announcement that 'black wednesday' was a bad episode for the economy.

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  • so FSA have come up with another review to accellerate failure of member firms. FSA is following thinking of previous leader Mr Davies, who wanted to put IFA's in a barrel and shoot them one by one. However when all IFA's are gone then the regulator will be reduced to licking boots of the big boys

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  • I am now wondering what the point was in making sure I was RDR ready?
    I suspect there are several other hundred's of advisors on the Herbert Smith SLS list (and not on the next list which will include Lifemark holders), plus other advisers who'd intended on staying post RDR who will be wondering if they'll even have a business this time next year, despite NO complaints from clients about the advice.
    What did the FSA see in 2007 that we didn't?
    Oh yes, it was the information only THEY could obtain using their intrusive powers, that they then failed to use until after millions more had been invested by consumers based on lies (misrepresentations are lies aren't they) that the FSA we now know were being promulgated.
    Or is it that Keydata were not actually lying and it was KPMG and HSBC?
    Will we ever know if there is not an independant investigation rather than a ?which hunt of advisers?

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  • The sale of life policies has been legitimate business for over 250 years, so there is a solid statistical basis for ensuring the process is both practical and profitable.
    Based on exactly the same information the resale of life polices should also be a viable, legitimate business. If it wasn't then we wouldn't be able to sell on our second hand houses, cars, etc. Auctioneers and antique dealers would be criminals and out of business. Life polices are an asset, and freely tradable, so there is nothing that I can see that automatically makes the trade repulsive.
    So the outcry on the sale of "traded life policies" must be based on a factor that, to date, has not been made explicit.
    Alternatively, the outcry relates to the way in which TLPs are commercially "organised" for re-sale. If this is the case then attention turns not to TLPs but the corporate structure of those trading in bulk.
    At this point the IFA, and the client, is in a very difficult position. Such structures are not always totally transparent, and often for good commercial reasons.
    The whole of the Stock Market is based on trusting that the companies in whose shares they trade are legitimate businesses. From time to time some companies will prove not to be as legitimate as was hoped, or, more often, incompetent. In the former instance there could be a legal case from compensation, in which case legal proceeding would be commenced and many Christmases would pass before compensation is received In the latter event, the investor takes a painful monetary lesson - fairly quickly, and the world moves on.
    In most of the TLP failures there appear to be factors that indicate legal compensation could be a factor, but even now this has rarely been absolutely established. But we have the FSA, FOS, FCS, FA, WRU and Uncle Tom Cobley getting involved, to compensate investors as quickly as possible. Judgements are being made whilst the facts still appear to be in dispute.
    If every Stockbroker was to be fined and disbarred in the event of companies going broke on the Stockmarket or AIM there would be very few left in business.
    So why do we have this rather puritanical and aggressive attitude to certain products in the financial services market? There is nothing wrong with the theoretical basis for TLP funds. There may be practical problem with the way these funds are run (a little like there is a practical way in which banks are run). Let's have a little more transparency on the problems so that it becomes possible to discern realistic safeguards, and allows the FSA to regulate rather than to strangle.
    We would all be a lot better off for some diligent assessment rather than the current lynch mob approach.

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  • Can I swuggest that we all hang on to this quote.

    "However the FSA admits today’s guidance may accelerate the failure of firms that sold these products.

    The FSA adds: “There is a risk that publishing this guidance may lead to a run and, if that jeopardises the viability of the product, consumers may lose money as a result.”

    It will come in useful when my firm sues the FSA for directly causing the loss of money by my clients

    The FSA are a sorry excuse for a joke.

    Their only beef with Life Settlements is the fact they don;t regulate them at the end of the day.

    Well sorry but if anyone has a worse regulatory record than the FSA I ahven't come across them.

    What a miserable shower of incompetents.


    Ian Coley
    Partner
    Medical Investment Services

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