View more on these topics

Colonial firm was not authorised for 9 years

A court has upheld an endowment complaint against Winterthur Life on the basis that a Colonial Mutual subsidiary it bought in 2000 was not authorised between 1989 and 1998.

The judgment at Croydon county court could open the door for claims from thousands of policyholders sold products by Colonial Mutual UK Holdings Group’s 800-strong salesforce.

It raises questions over the FSA’s role in the matter and a complaint has been sent to Complaints Commissioner Sir Anthony Holland.

The case was brought by a Croydon couple who claimed that the purchase of two endowment policies from Colonial Mutual Holdings Group in 1990 was in contravention of the Financial Services Act 1986. They asked to recover premiums paid, totalling over 6,000, and compensation for cashing in other endowment policies.

The judge ruled in favour of the claimants for the sum of money claimed plus costs.

Judge Fink’s ruling agreed with evidence showing that CMHG did not have a section 44 agreement to act as an appointed representative of Colonial Mutual, which was required under the Financial Services Act 1986.

Evidence included a letter from the PIA showing that appointed status had been backdated from 1998 to 1989 – the year after the Financial Services Act 1986 was enacted in 1988.

Winterthur Life bought Colonial and its subsidiaries in 2000 for 300m after it demutualised in 1996.

The company claimed a section 44 agreement for CMHG was in place and used a letter from FSA director of investment business Michael Folger from 2001 stating this.

The claimants’ solicitor requested the FSA to back up this statement in court but instead a letter from FSA company secretary Iain Brown stated that although CMHG had acted as an appointed representative for Colonial Mutual since February 1989, written agreement was only reached in 1993.

The court also heard that in a previous case from 2001, Winterthur claimed it could provide a copy of the section 44 if required by court, yet in December 2003 it admitted it could not provide any evidence and there was no copy in the company’s archives.

In her ruling, Judge Fink said although Winterthur had asked her to rely on previous FSA statements, “there is other evidence in and I simply cannot ignore it”.

Judge Fink said in view of the evidence of backdating from the PIA and the fact that Winterthur could not provide a section 44 agreement, saying: “I think the claimant has made out his claim and I think he is entitled to his judgment”.

A Winterthur spokesman says: “This case was decided on a technicality. It is Winterthur’s position that its policyholders were not prejudiced by this technically defective appointment.

“Winterthur is not in any way seeking to avoid any of its regulatory obligations or applicable regulatory rules during the period in question.”

Recommended

Lands of opportunity

May’s correction has shaken out nervous investors while opening up long-term global prospects

Value is the real issue

How disappointing but not surprising to see the Association of British Insurers drop its review on the payment of commission.

Fair warning

The March 2007 deadline has concentrated minds on incorporating the TCF principles in business

Pridham Report shows UK retail funds beating rest of Europe

UK investors remain positive despite retail sales volumes for the latest quarter falling by 17 per cent, according to Feri Fund Market Information.Feri’s latest UK Fund sales report, the Pridham Report, finds that UK mutual funds did not suffer the cull seen in other European markets. The UK saw an increase in repurchases during May […]

UK housebuilders remain a value trap – despite post-Brexit falls

Despite the sharp drop in housebuilders following the Brexit result, valuations in the highly illiquid market are still at elevated levels. And whilst some investors may take comfort from superficially low price/earnings multiples, are earnings sustainable over the long term, asks Holly Cassell, Assistant Manager of the Neptune UK Mid Cap Fund. Click here to […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com