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Consumers hit out at FSA over life settlements

FSA Sky 480

Almost a fifth of complaints made by consumers about the FSA in 2011/12 were sparked by the regulator branding traded life settlements as high- risk, “toxic” products.

In November, the FSA announced plans to ban traded life settlements from being marketed to UK retail investors and confirmed its intention to impose the ban in April.

A total of 308 consumer complaints were made against the FSA between 1 April 2011 and 31 March 2012. A freedom of information request, submitted by Money Marketing, has found 49 complaints, or 16 per cent, related to the FSA’s November guidance consultation on traded life settlements.

The FoI response says consumers took issue with the FSA’s description of life settlements as “toxic” and “the perceived detrimental effect this statement had on consumers’ investments”.

In November, then FSA managing director Margaret Cole said traded life settlements are “toxic products” which had caused “significant consumer detriment”.

The move prompted the EEA Life Settlements fund to suspend redemptions at the end of November. It is yet to reopen to investors.

An FSA spokeswoman says: “The reaction of retail customers to the publication suggests many did not understand the risks to which they were exposed until the guidance clarified it for them.”

Fishburns partner Harriet Quiney says: “Histrionic and sweeping statements such as Cole’s are bound to increase consumer anxiety and clear a path for claims management companies to charge down.”


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There are 5 comments at the moment, we would love to hear your opinion too.

  1. “The reaction of retail customers to the publication suggests many did not understand the risks to which they were exposed until the guidance clarified it for them.”

    What a load of condescending twaddle.

    Typical reaction of the FSA – the public is stupid and need protecting by us clever individuals!

  2. We still don’t know what caused the failure of the life settlement funds marketed by KeyData. Was it actuarial failure or fraud? Perhaps Money Marketing could find out the cause of the failure?

  3. Were not all KeyData’s products authorised and, by implication, approved by the FSA prior to being marketed?

    And even if they were the former but not the latter, shouldn’t the FSA have publicised any concerns it might have had before allowing them to be actively marketed?

    It’s the same familiar old story isn’t it ~ trying to lock the stable door after the horses have bolted and then blaming it all on everybody else?

  4. Perhaps the FSCS know the answer to my question above. I’m going to contact them to find out. I’ll let you know the answer.

  5. I contacted the FSCS and they said the Keydata failure was due to a combination of actuarial miscalculation and fraud. The person I spoke to told me that it was partly actuarial failure “because the people kept living too long”, and partly fraud because a bloke absconded with a load of money and died in Singapore. The life industry is based on actuarial calculations, so is an investment that is based on actuarial calculations low risk, medium risk, or high risk? What is the investment risk that an investment fund employs a fraudster with access to clients’ money? Let’s remember that we are dealing with regulated investments and IFAs are being held liable for this debacle.

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