Aifa is calling for a review into whether the closure of EEA Life Settlements Fund was a direct result of the FSA’s proposal to ban life settlement funds from being marketed to UK retail investors.
The FSA published a guidance consultation on life settlements, or traded life policy investments, last month. The regulator branded TLPIs as high risk, toxic products and revealed plans to ban the marketing of TLPIs to retail investors.
Three days after the consultation was published, EEA decided to suspend dealings in the fund after receiving unprecedented levels of redemption requests from advisers and institutional investors.
Aifa director general Stephen Gay (pictured) says: “The FSA’s recent warning on the life settlement class has already forced one fund to close. This has caused real consumer detriment and may, in fact, have harmed the very people they are seeking to protect.
“There must now be a review to establish if this closure was likely to happen regardless or if it was the direct consequence of the regulator’s intervention.”
Gay says there are also concerns about how this more interventionist approach from the FSA will play out in future.
He adds: “If the regulator is to have significant product intervention powers, it is vital we know how they will work in practice and how they will assess the impact.
“The system of accountability for the regulator has relied on internal self-assessment with the result that there have been few external effective checks and balances in place. The FSA must be much more accountable for its actions.”