City watchdog cleared over Equitable
Parliamentary ombudsman Ann Abraham has cleared the Financial Services Authority of maladministration over Equitable Life in a major blow to policyholders' hopes of Treasury-funded compensation.
Link: Equitable report delayed again
Reporting on a single complaint from ‘Mr P’ she said she fully recognised policyholders’ outrage, but concluded: ‘I am satisfied that the actions of the FSA, acting as prudential regulator on the Treasury’s behalf, were not maladministrative and cannot be said to have caused the injustice which Mr P alleges.’
Abraham said her predecessor was right to express strong reservations about whether a restricted ombudsman investigation could establish all the facts relating to the closure of Equitable to new business in December 2000.
She said she did not believe anything more would be gained from further investigation by way of providing remedies for policyholders. To continue would be offering policyholders false hope and she has decided not to investigate any further complaints about the prudential regulation of Equitable.
Mr P claimed the regulator had failed to take appropriate regulatory action which would have ensured that existing and potential policyholders were able to make fully informed decisions when purchasing new policies or annuities from Equitable, allowing Equitable to continue to encourage him and other investors like him to purchase a with-profits annuity without a full understanding of the risks involved.
Abraham said she was satisfied that the FSA had has to assess and reassess whether formal regulatory intervention was warranted and whether they had sufficient grounds.
She said: ‘Given that such intervention was likely to have a significant impact on Equitable’s future profitability and even viability, could therefore impact adversely on policyholders, and would probably provoke legal challenge, it was clearly not action to be taken lightly.’
She said the FSA could not intervene while Equitable’s differential terminal bonus policy was before the courts but could have when the legal process concluded adversely for Equitable.
They then had to decide whether to close Equitable to new business or let them try to sell the business as a going concern. The FSA believed that this would at least enable Equitable to try to get the best outcome for policyholders and she could not say the decision not to intervene at this point was unreasonable.
She claimed that had the FSA acted then, there would have been a public outcry on the ground that they had misjudged the situation and acted inappropriately.
She added: ‘I cannot therefore say, on the basis of the evidence I have seen, that any of the decisions the prudential regulator reached in respect of the exercise of their formal intervention powers were unreasonable or fundamentally flawed such that I would consider them to be maladministration.’