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FSA refers two with-profits providers to enforcement

The FSA has referred two with-profits providers to its enforcement division for further investigation after finding their governance arrangements were not adequately protecting policyholders’ interests.

The FSA found, in its review into the operation of with-profits funds, that a significant number of firms are not adequately demonstrating the practices it expects from a well-run with-profits business.

The review focused on whether firms were treating their with-profits policyholders fairly, looking specifically at how senior management in firms have implemented FSA rules.

The FSA flagged up ineffective governance of with-profit funds, especially in how independent challenge is provided by firms’ with-profits committees, which means that policyholders’ interests may not be properly protected as a major concern.

It also highlighted significant weaknesses in the quality of consumer literature, adding that it is not satisfied that all firms are doing enough to ensure that policyholders receive sufficiently comprehensive, timely and clear information to help them understand their policies.

The FSA says firms have been told to take action quickly to improve their operations with several being directed to make immediate changes to their governance arrangements to better protect policyholders’ interests.

The regulator says it will be monitoring firms’ responses closely and will consider disciplinary action if firms do not address the concerns.

FSA insurance sector director Ken Hogg says: “This review shows that, while there has been some progress, there is still more work to be done by firms in the with-profits sector to make sure that their policyholders are treated fairly. We expect all firms to raise their game in this area, not just the firms that we reviewed.

“Our focus on with-profits does not end with this review. Firms should make sure that their communications with policyholders are clear and manage expectations about the likely performance of their policy.

“They should also ensure that their with-profits committees are providing an independent challenge to their management. We will continue our intensive supervision of the with-profits sector and we expect firms to take action to address our concerns.”

Which? has slammed the report, claiming the FSA must name and shame the firms it has referred to enforcement.

Chief executive Peter Vicary-Smith says: “Despite reviews dating back as far as 2001, the FSA has continually failed to look out for the interests of with-profits policy holders. It effectively looked the other way when Prudential, AXA and then Aviva plundered the inherited estates of their with-profits funds and failed to act despite criticism from Which? and the Treasury select committee.

“The FSA must name the firms that it is referring to enforcement and set in place rules that will ensure fair treatment for with-profits policyholders.”


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There are 12 comments at the moment, we would love to hear your opinion too.

  1. The biggest Ponzi schemes of all time?

  2. Which two..?

    It’s alright then to refer to an individual’s medical condition (Perkins thread) but providers get anonymity…

    An investigation into the mismanagement of with profit funds is long overdue

    If proven I trust that those who have had to suffer poor returns will be compensated, even though surrender of the policy/ies may have been effected.

    Naw…. cloud cuckooland but it’s worth a try..

  3. Pissed Off IFA 29th June 2010 at 1:24 pm

    Is nothing sacred from the bullys at the FSA? The article does not state the name of the providers involved but this hassle will surely just put more stress on the companies and ultimately the policyholders will suffer.

    Is it not about time that the FSA were referred to enforcement?

  4. You must for IFAs sake name the two

  5. Just a thought – because I haven’t recommended With Profits since the last century and am not likely to – but if I did and it subsequently turned out that my recommended provider was one of these two AND my client complained, could I pass the complaint on to the FSA for them to deal with……?
    No, I thought not.

  6. Why have the two companies not been named?

  7. I suspect it will be an old WP fund not currently available, but agree we should know. I suspect also that if it was a fund still available the provider would have to advise you, or refuse to accept client investment. I also suspect they would have to write to existing policyholders… But again clarification should be forthcoming so that we can apply where applicable TCF… Regards G

  8. Philip Corneby 29th June 2010 at 3:22 pm

    Enforcement implies that there could well be a fine for someone at the end of all this. If history is anything to go by then the with profit policyholders in question may well end up paying it and not the errant company running the funds. That is what investor protection is all about!

  9. Gareth E K Smith 29th June 2010 at 3:45 pm

    I am dealing with a client who has an ex Britannic Assurance Personal Pension that is now with Phoenix.

    His last statement was dated April 2009 and any literature for this plan on their website is dated April 2009.

    They have also not updated their PPFM.

  10. Julian Stevens 29th June 2010 at 4:11 pm

    Ken Hogg ~ now there’s an apt name for somebody working at the FSA. I wonder how big his bonus was last year?

  11. What do the FSA do with all the fines monies? Do they “plunder their inherited estates” to pay their vast bonues?

  12. Just a thought – if listed companies are facing significant fines and associated costs from FSA disciplinary action, are they not guilty of market abuse by not disclosing this to the market?

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