The FSA is coming under pressure to explain why it granted Equitable Life approval for stakeholder pensions just a month before it closed its doors to new business.
The regulator is also under fire from regulation lawyers for giving too much weight to the opinions of Equitable's legal team which was confident Equitable would win its House of Lords appeal case in July.
Equitable gained stakeholder manager approval from the FSA before registering with Opra on November 10 although its authorisation was withdrawn at its own request on December 8.
Conservative Party pensions spokeswoman Jacqui Lait is calling for the FSA to examine in the ongoing internal inquiry how Equitable gained stakeholder status and why its application was not delayed until a buyer was secured.
The news is sending shock waves through the industry, casting a further shadow over confidence in the FSA to meet its key regulatory remit of protecting consumers.
The regulator sets capital-adequacy standards for new entrants seeking stakeholder authorisation to guarantee they can cope with the strains of bulk, low-margin business but stakeholder approval for existing pension providers is effectively automatic.
Opra communications man ager Mick Edmans says: “Nothing was raised at the stage when Equitable applied for stakeholder authorisation. If anyone was responsible for looking at financial strength it was the FSA.”
Skandia pensions and multifunds brand manager Peter Jordan says: “It is quite scary to think that just before Equitable closed to new business it was approved as a stakeholder manager.”
FSA spokeswoman Deb orah Fowler says: “If we had foreclosed new business opt ions to Equitable it would have raised questions on the sale as a going concern. At the time of approval, they were solvent and still are.”
Cameron McKenna partner Simon Morris says: “The prevailing legal opinion in July did not expect Equitable Life to win. Anyone who says the House of Lords is easy to predict does not have an understanding of the situation. In this case, such a statement is no more than pure speculation.”