FSA Broke The Law
The start of the appeal hearing by Legal and General, against the fine imposed on it by the Financial Services Authority, revealed some interesting backstage dealing.
It seems that the Financial Services Authority, by offering to "cut a deal" with Legal and General over the size of the fine imposed on it, may have broken the law.
The FSA offered to reduce its £1.3M fine on L&G, if L&G promised not to proceed with its appeal against the fine.
That's a bit cheeky, isn't it?
The law, it seems, is unequivocal on this point; the FSA cannot use means, such as offering to reduce fines, to deter or obstruct firms from going to an appeals tribunal.
L&G are contesting that the FSA changed their minds about the quality of L&G's processes, in respect of endowment sales, after publicity about mortgage shortfalls in 1999/2000.
The FSA claimed that L&G's systems for processing endowments were deficient, and resulted in L&G mis-selling the products to "financially unsophisticated customers including an unemployed housewife."
The outcome of this hearing will be watched by everyone in the life assurance industry. If the FSA loses, it will embolden other life assurance firms to stand up to the FSA.