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Mystery tour

I praised him for his dogged determination at forcing the FSA to release the names of the 12 life companies found by the PIA, to have been engaged in “pre-contractual misrepresentations and in some cases a breach of contractual warranty”.

Some of the companies were required to pay comp-ensation to policyholders.

However, the PIA and then the FSA refused to publish a list of which companies had been investigated. Owen refused to let matters lie and asked the Information Commissioner to force the FSA to name those life offices under the Freedom of Information Act. The ICO says the FSA must release that information, although the matter is subject to appeal.

The issue has come back to bite IFAs. It turns out that the IC has now ruled that the FSA must issue the names of advisers who performed badly in a mystery-shopping exercise on equity release.

The IC wants the FSA to disclose the identities of seven firms investigated.

The regulator is again appealing against the decision, this time on the grounds that it could “endanger the commercial interests of advisers who are mystery-shopped, on the basis of results that may not be truly reflective of their market practices”. It might also lead to demands for compensation against the companies concerned.

It is hard not to feel some sympathy for this view. We all know when a company is “named and shamed” that it can lead to a wave of claims from clients who were previously satisfied with the quality of advice they were given at the time.

Equally, there is a strong argument that what is sauce for the goose is sauce for the gander. If Owen was right to insist on the names of the 12 offending life offices being released, should details of the seven IFAs also be made available?

The editor of Money Marketing clearly thinks not. In his Viewpoint column last week, John Lappin argues that the mystery-shopping exercise was not part of an enforcement process, so the names should not be issued.

The problem is, if my reading of the situation is correct, what the IC says it wants published are, yes,the identities of seven firms investigated – but in relation to subsequent investment advice given to clients and the result of that invest-igation. The IC also told the FSA to disclose the covering letter, index of report, summary of findings and suitability for each of the firms further investigated.

In other words,the FSA should give details only of firms whose overall approach to investment advice was seriously under scrutiny, not specifically in relation to equity release but also other related issues.

Even so, are there still grounds for not releasing that information? I would argue that there might be. If, for example, the FSA found that in relation to overall standards of compliance the firms investigated had been found to be in the clear, there is an argument that they should not be named and shamed. Similarly, if compliance faults were found but were isolated incidents rather than whole-sale problems, a similar approach ought to be adopted.

However, if the FSA determined that any compliance breaches were serious enough for the firms to be required to review all their equity release and similar cases, with a view to offering compensation to clients who might have been negatively affected, then my argument would change.

We know from a similar situation at the David Aaron Partnership a few years back that an internal review of its precipice bond sales would almost certainly have yielded a far smaller number of misselling examples than the very public intervention by the FSA at the time, which led to 8,000 cases being unearthed.

To try artificially to separate the consequences of an investigation from what originated is a false way to look at things. It might have started off with a mysteryshopping exercise but if things went on from there to look bad for the IFA firm concerned, it deserves whatever the regulator chucks at it.

There is a strong argument in favour of mystery shopping being as scientific as possible in its approach towards the companies concerned. Benchmarking, the way that questions are posed, evaluations and conclusions from any exercise ought to be open to scrutiny anyway, regardless of whether firms are named.

It is not enough for us to be told that a mystery-shopping exercise was carried out and it produced XYZ results, without us knowing what the criteria and processes involved were.

Without it, mystery shopping remains too much of a grey area.

But, in principle, there is nothing wrong with naming and shaming – even after a mystery shopping exercise. After all, if it was good enough for Evan Owen, it is good for all IFAs.

Nic Cicutti is the editor of He can be contacted at


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