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Leading Tory MP says Govt abandoned Lehman investors

Conservative MP Ed Vaizey has accused the Treasury of “washing its hands” of the investors who lost millions of pounds in structured products backed by Lehman Brothers following the bank’s collapse last year.

Speaking at a private members’ debate on structured products at Westminster Hall on Tuesday, Vaizey said that although 6,000 UK investors lost around £200m in these schemes, the Treasury says it is not its problem because the losses were due to “poor investment performance”.

Vaizey said: “It reminds me of a Monty Python sketch about a dead parrot. I think poor investment performance is perhaps understating it when you invest £200,000 in something that is advertised as 100 per cent capital secure and then wake up some weeks later to find that your investment is worth precisely zero.

“But poor investment performance is the phrase the Treasury likes to use in this case.”

Responding, exchequer secretary to the Treasury Sarah McCarthy-Fry said it was not the Government’s role to guarantee that investments will always perform as well as investors would hope.

She said: “Now, the Government has intervened to protect depositors who held money in the Icelandic banks but parallels should not be drawn between depositors and those invested in structured products with a guarantee backed by a third party such as Lehman brothers.”

McCarthy-Fry said that investors had invested around £107m in 23 Lehman-backed structured products. She said the products were marketed by four plan managers with 95 per cent being sold via 800 intermediaries.

The FSA, Financial Ombudsman Service and the Office of Fair Trading are currently undertaking a wider implications process on structured products.

McCarthy-Fry said the FSA would be updating its position on August 10 this year.


Website Comments

On last week’s call for the FSA to clarify its stance on phoenixing

The FSA has a sad record with regard to their inaction, despite talking tough. Ultimately they are meant to answer to the Treasury. I have corresponded with the Treasury Minister, Stephen Timms, for a number of years over this issue, but they clearly need to be told the extent of feeling about phoenix companies before taking action.

Stephen Girling, SG Wealth Management

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