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FSA set for ban on using with-profits funds to pay fines

Life offices hit by fines from the regulator will no longer be allowed to pay them out of their with-profits funds or orphan assets, according to an FSA proposal.

The proposal, in CP137 Miscellaneous Amendments to the Handbook (No 2), would prevent publicly owned life offices from using policyholder funds to settle FSA fines.

IFAs say the move makes sense because it would force life offices to think carefully before they acted but shareholders would be penalised.

Consultation closed on July 19 and the industry awaits the FSA&#39s response.

Baronworth Investment Services director Colin Jackson says: “I understand the logic because it will probably make them a little more careful because they will know any fines will come out of the bottom line but it will do investors no good at all.”

Aegon UK group public affairs manager Scott White says: “You have to ensure that the full participation in your business success is shared both by policyholders and shareholders.”

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