Call to use JDS fine to pay Equitable investors

The case has been referred to the JDS

Any fine imposed on Ernst & Young as a result of the disciplinary investigation into the firm’s conduct while auditor of Equitable Life should be handed over to former policy holders, according to the action group representing their interests.

The claim ­ from the Equitable Members Action Group ­ concerns a tribunal reviewing the role auditors Ernst & Young played during the 2000 collapse of the life insurer. The case was referred to the Joint Disciplinary Scheme by the ICAEW.

John Newman, chairman of the group, has written to the ICAEW president David Furst, asking him to consider handing over the money to a policyholders trust fund if the firm is found ‘culpable’.

In the letter he claims ‘a fine ­ if this were levied [would] accrue in the main to the ICAEW and hence ultimately reduce the subscriptions of the members… but the public interest is not served, those who suffered because of the Equitable debacle are the policyholders of Equitable.

‘It may be possible for there to be a contract in which Ernst & Young accepts a degree of culpability and makes a substantial payment to the policyholders trust fund; the JDS would join the contract and make levying a nominal fine conditional on such a payment being made.’

Policyholders lost an estimated £4bn in savings when Equitable Life collapsed after it emerged that it did not have the cash it had guaranteed to some policyholders.
A £2.6bn civil claim brought against Ernst & Young in 2003 was thrown out by a High Court judge.

JDS executive counsel Chris Dickson said there was no provision in the JDS scheme
for compensation. ‘Any penalty imposed would go into offsetting the costs of the tribunal. Any matter for compensation was a matter for the civil court,’ Dickson said.

JDS conclusions on E&Y are expected at the end of the year. Both the ICAEW and E&Y declined to comment.