Last week, L&G wrote to 2,300 clients with over £33m invested in its accelerated growth investment plan 2 and protected capital and growth plan 4, warning them that up to 20 per cent of their investment was at risk due to Lehman exposure.
Meteor Asset Management, NDF, DRL and Arc all confirmed Lehman exposure soon after the bank filed for bankruptcy on September 15.
Compliance consultant Adam Samuel says L&G’s delay could breach treating customers fairly guidelines. The FSA has confirmed it is looking at the effect of recent market developments but would not comment on individual companies.
AWD Chase de Vere senior manager Jason Walker says: “I am very surprised it has taken L&G so long to come out, it is pretty disgraceful. It would have known the counterparty at the time and should really be letting people know as soon as they can about the risk to capital. You almost think they have held off so they did not get caught up in it all at the time.”
Chelsea Financial Services head of investment products Matthew Woodbridge says: “The timeline is not really in keeping with what they normally do as they pride themselves on being open and honest and not taking huge risks.”
L&G says it felt it “more appropriate” to wait until after the Lehman creditors’ meeting on November 14 when it would be in a position to advise whether funds would be recoverable.
The firm says it will not be liable for potential losses. A spokesman says: “The original product brochure explains very clearly if financial institutions fail to pay L&G back, customers would not get back all their original investment and the growth potential may be impacted.”
Samuel says: “TCF outcome three is: ‘Consumers are prov- ided with clear information and are kept appropriately informed before, during and after the point of sale.’ Customers may well not have recalled their investment was exposed to the risk of Lehman defaulting. The moment that a problem comes up, L&G should have been communicating the problem to customers.”