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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.”


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