FSA Accused Of Breaking The Law Over L&G Fine Offer

by Robin Pilgrim, LawAndTax-News.com, London

16 September 2004

UK insurance firm, Legal & General has alleged during its appeal hearing before the Financial Services and Markets Tribunal that the Financial Services Authority illegally offered to reduce its penalty for the mis-selling of endowment mortgages if the insurer agreed not to appeal said penalty.

According to Charles Flint, the firm's legal representative, the FSA initially sought to impose a £1.3 million fine on the insurer, alleging that it did not have proper sales and compliance procedures in place, and as a result, mis-sold the risky investment-based mortgage packages to risk-averse customers.

Legal & General rejected the regulator's claim, arguing that its investigation into the matter was flawed, and that the FSA's Regulatory Decisions Committee is not truly independent.

According to the Telegraph, Mr Flint told the tribunal that the regulator agreed, in a letter sent last September, to reduce the fine from £1.3 million to £1.1 million, on the understanding that "there was not going to be a reference to the tribunal".

He went on to suggest that:

"Under the statute, Legal and General has the right to refer any decision to the tribunal. It was quite unlawful to seek to obtain the agreement in some way to the effect that the applicant should agree not to refer the matter to the tribunal."

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