18/01/2005
Insurer Legal & General Group PLC (L&G) has won a partial victory in a campaign to overturn a ruling by the City regulator that it mis-sold endowment mortgage policies to thousands of homeowners in the late 1990s.
In a landmark decision, the Financial Services and Markets Tribunal today ruled that L&G did not have sufficiently robust procedures in place to prevent the mis-selling of endowments.
But the Tribunal found clear mis-selling in just eight out of 60 alleged cases set out by the Financial Services Authority (FSA), the financial markets watchdog.
The Tribunal's decision relates to an appeal by L&G against a 1.1 mln stg fine imposed on it last year by the FSA for selling endowments without making sure customers understood that the policies might not pay off the full value of their mortgages.
In a 102-page ruling, the Tribunal said that while L&G's inadequate safeguards 'will have caused or contributed to mis-sales,' its procedures had previously passed inspection by the Personal Investment Authority, the body which regulated endowment sales until December 2001.
And in a further vindication of L&G, the Tribunal ruled that the FSA's Regulatory Decisions Committee (RDC), which reviews the decisions of the watchdog's investigations division, had not given the insurer's defence a fair hearing. It concluded that the fine imposed on L&G by the FSA should be reduced.
'In our view, the RDC was in error in its approach to the mis-selling case, and reached conclusions not justified by the material before it,' the Tribunal said.
L&G had argued that the RDC 'rubber-stamped' FSA investigators' original decision rather than impartially weighing up its defence against their findings.The Tribunal will hold a further hearing to set the amount of the fine to be paid by L&G.
'We feel pretty upbeat about (the ruling),' Legal & General finance chief Andrew Palmer told AFX News.'It's not a complete vindication for us, but the process has resulted in a thorough review, which is what we were after all along. It is important for shareholders and policyholders to have confidence in us, and in the way the industry is regulated. We felt the RDC process had not given us that degree of confidence.'He added that L&G had already improved its sales procedures, saying these are 'constantly updated.'
Complete article here: UK.Biz.Yahoo.
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