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Warning that PI firms will oppose early split-cap payouts

Companies which try to heed FSA calls to pay early compensation to investors in collapsed split-capital investment trusts will face strong opposition from professional indemnity providers, warns law firm Reynolds Porter Chamberlain.

The law firm, which specialises in insurance, says PI firms will fight early payout moves as they are under no obligation to cover costs unless companies are legally liable to pay compensation.

The news will come as a blow to FSA managing director John Tiner who, at an AITC conference last week, urged firms in the split-cap debacle to compensate investors before they were forced to by the regulator or the Financial Ombudsman Service.

RPC partner Jonathan Davies says that, although fund managers and IFAs may believe the PR benefits gleaned from implementing Tiner&#39s proposal may surpass cash considerations, they still have a legal obligation to protect shareholders.

The firm says PI providers would also be wary of setting a precedent which leads investors to believe that companies will bail them out whenever they lose money, which would encourage them to take on inappropriately high levels of risk.

Davies says: “While fund management companies may feel that the PR benefits they get from paying unwarranted compensation outweigh the cash cost, it is unlikely that insurers will want to fund such marketing activities.”

FSA spokesman Rob McIvor says: “We do not believe that compensating investors is necessarily admitting liability. Companies would be saying they got it wrong rather than that they missold anything.”


Standard says Govt figures wrong over lifetime limit

The number of people who will be hit by the £1.4m lifetime limit could be three times the figure stated in the Pensions Green Paper, warns Standard Life.It says the Green Paper only refers to the 5,000 individuals with personal pensions of over £1.4m but does not mention executive pension plans over the proposed limit, […]

Outside edge

Grinding through the 50 pages of CP166, I am reminded of the words of HL Mencken: &#39To every difficult and complex problem there is an obvious solution that is simple, neat and utterly wrong.”No chance of the FSA falling into that trap, then. But after a lifetime of working with actuaries, I am equally well […]

The glare goes off polarisation

Could it be a case of as you were for IFAs? The FSA head of retail projects David Severn said as much at the Money Marketing Top 100 summit last week.Analyses by many providers and IFAs suggested that in the next few years the market will, by and large, remain polarised, perhaps between IFAs and […]

&#39Definitions as important as price in comparing CI cover&#39

Skandia says IFAs advising on critical-illness cover should pay as much attention to the definitions of illnesses as they do to premiums or face the risk of legal action.Seven out of the 12 CI providers have changed their products in line with the revised ABI code of practice to exclude prostate cancer, according to protection […]


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