The Endowment Diary

The Endowment Diary


The Endowment Mis-selling Debacle - one of the UK's worst financial scandals

Tuesday, January 04, 2005

Judgement Day

Judgement Day

The long awaited judgement, in the case of the FSA vs Legal and General (L&G) will be announced around the 10th of January.

The Financial Services and Markets Tribunal said that the delay in announcing their judgement, was due to sickness and holidays.

L&G went to the tribunal in 2004, in the hope of overturning the £1.1M fine imposed on it by the FSA for endowment mis-selling.

The FSA claimed that there were "fundamental deficiencies" in the way that L&G sold mortgage endowments to low-risk customers, between 1997 and 1999; specifically, their sales and compliance procedures were found to be wanting.

It is reported that customers were given unsuitable recommendations by sales people.

An internal memo at L&G admitted, that the policies had "a very real risk of shortfall at maturity". The FSA also detailed how L&G had failed its own mock regulatory inspections.

The 5 week hearing ended in October, the FSA and insurance industry having been holding their breath ever since.

Should L&G win the case, then the credibility of the FSA would take a severe "hammering". It would also act as the green light for other insurance companies to challenge decisions, and fines imposed upon them by the FSA.

However, should the FSA win it would provide a boost for its reputation and provide a firm underpinning of John Tiner's position as CEO. Whereas the CEO of L&G, David Prosser, may well have to resign.

We, the hapless holders of these underperforming and useless endowment policies, wait with baited breath.

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