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SPI regulatory blunder over US plans

Scottish Provident&#39s offshore arm has written to around 100 IFAs informing

them their customers must surrender their policies because of a regulatory

blunder.

Isle of Man-based Scottish Provident International has been left with egg

on its face after it discovered it had sold policies into the US in direct

contravention of Security Exchange Commission regulations.

SPI&#39s mistake was discovered during an investigation into marketing

opportunities with US expatriates. SPI and its policies are subject to Manx

law and regulation but there are circumstances where US law and regulation

also apply.

Three sets of circumstances were identified where SPI has been trading in

contravention of SEC regulation. These are when a policyholder is a US

resident when the policy is purchased, advice is given or the sale is made,

solicited or applied for in the US.

The rules would also be broken if a policyholder becomes resident in the

US while the policy is in force and when a policyholder is a US citizen

residing outside the US.

Policyholders surrendering their policies who fall into the first category

will be refunded in full, with premiums and the incremental value of the

policy paid without charges. Other policyholders will be offered the option

to surrender policies without charge for their current value or have them

frozen while resident in the US.

SPI has assured IFAs there will be no clawback of commission on these

policies but it has refused to divulge how much the error could cost the

firm.

In its letter to IFAs, the company warns that US laws on the regulation

of sales of securities and life insurance might also affect intermediaries.

It says: “You should carefully consider the implications on your business.”

Marketing and corporate development director Bryan Low says: “We have

inad- vertently technically been selling into the US. We suspect we are

not alone in this and have written to IFAs alerting them to the fact.”

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