The Investors' Compensation Scheme says it demanded £1m personal guarantees from Towry Law executive directors to cover any potential further pension misselling liabilities.
The guarantees were made a condition of the £30m Advizas' deal. They will apply only if it emerges the seven executive directors were aware of but failed to fully disclose additional liabilities,.
The ICS says that if it comes to light that information given at the time of the deal between the ICS, Towry Law and Australian giant AMP was not full and accurate, then each director could be personally pursued for costs up to £1m.
The ICS defends the agreement to meet £30m of the £50m estimated pension misselling liabilities uncovered at Advizas, which many IFAs regarded as a bail out by levy-payers of an ailing competitor.
ICS chief executive Suzanne McCarthy says: “We have not paid a penny of the £30m yet and none has gone to AMP or Towry Law directors. It will only ever be paid out to investors.
“The ICS will be paying £30m when it would have had to pay £50m if we had not been pragmatic and looked very carefully at the options. If we had not done this, IFAs would have been very discomfited. This agreement did not produce benefits for the directors. We are not here to bail out firms, we are here to compensate investors.”
McCarthy also told MM this week that she is optimistic that it may not be necessary to pay out the full £30m to Advizas' clients, which could save IFAs from an increase in the 2002/03 levy. The ICS now says it aims to offer IFAs an open avenue of communication to ensure transparency surrounding its aims and remit.
Syndaxi Financial Planning director Robert Reid says:”Personal guarantees only have value depending on the willingness to impose the guarantees should any further liabilities be uncovered.”