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Watchdog probes FSA on unauthorised firm

The independent Complaints Commissioner is investigating the FSA’s handling of a complaint against a Colonial Mutual subsidiary that was not authorised for nine years.

Last August, Money Marketing revealed that a county court had upheld a complaint over an endowment policy sold by Colonial Mutual UK Holdings Group on the basis that the firm was not authorised between 1989 and 1998.

The judge agreed with evidence showing CMHG did not have a section 44 agreement in place – needed under the Financial Services Act 1986 to act as an appointed rep – and accepted evidence that the PIA had backdated its AR status from 1998 to 1989.

The judgment called into question the FSA’s handling of the affair as the regulator stood by its view that a section 44 agreement existed until December 2005, when it was requested to back up this claim in court and then conceded there had been no written agreement.

The FSA stood firm despite repeated refusals from Winterthur – which bought Colonial Mutual in 2000 – to produce a copy of the section 44 agreement and the fact that the PIA was aware in 1998 that AR status had been backdated.

In December 2005, the claimant’s solicitors received a letter from FSA company secretary Iain Brown stating that although “the company (CMHG) has acted as an AR for Colonial Mutual since 27 February 1989”, “the company (CMHG) and Colonial Mutual entered into a written agreement with respect of the appointment of the company (CMHG) as an AR for Colonial Mutual on 1 April 1993”.

The Complaints Commissioner has been investigating the matter since mid-November and is waiting to receive information from the FSA, despite chasing the regulator regularly.

A spokesman says the Complaints Commissioner does not comment on ongoing investigations.


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