Final Decision Reached In Legal And General Tribunal

by Robin Pilgrim, LawAndTax-News.com, London

31 May 2005

The UK's Financial Services and Markets Tribunal last week published its further decision on three matters arising from its decision of 18 January 2005, concerning Legal & General Assurance Society Ltd.

In September 2004, Legal & General launched an appeal before the Tribunal over the Financial Service's Authority's decision regarding L&G's sale of endowment mortgages between 1997 and 1999.

The FSA had imposed a £1.1 million fine on the insurer, alleging that it did not have proper sales and compliance procedures in place during the period in question, and as a result, mis-sold the risky investment-based mortgage packages to risk-averse customers.

However, 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, a reading of the situation which was in the main supported by the Tribunal when it delivered its verdict earlier this year.

The Financial Services and Markets Tribunal concluded last Thursday that L&G should pay a financial penalty of £575,000, a reduction from the original penalty of £1.1 million imposed by the Regulatory Decisions Committee. However, no order for costs has been made, meaning that the life insurance firm will be left to foot the £2 million legal bill due to its legal adviser, Freshfields Bruckhaus Deringer.

Finally, the Tribunal stated that no recommendations were being made to the FSA under Section 133(8) of the Financial Services and Markets Act 2000, as the FSA is undertaking its own review of enforcement processes.

In a statement responding to the decision, the Financial Services Authority announced that:

"The FSA notes these conclusions and observations and, in particular, the Tribunal's criticisms of the transparency of the RDC process. These points are under active consideration as part of the FSA's wide-ranging review of enforcement processes, the outcome of which will be published in July."

Meanwhile, it also emerged last week that Legal & General has ended speculation on the identity of the successor to chief executive David Prosser, revealing that the head of its fund management arm, Tim Breedon will assume the role in March 2006.

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