EEA Litigation Group (EEALIT)

A few days ago I met with David Trinkwon, of the EEA Investors Group, for the first time (in person) although we have communicated via phone and email for more than two years.

The purpose of our meeting was to discuss the possibility of legal proceedings against various parties who allegedly have damaged EEA investors’ funds.

David, and a number of associates, have set up a group (EEALIT) for this purpose and would like me to communicate its existence to you.

At this point in time, I neither endorse nor denounce the group but I do feel it’s appropriate to ensure you are aware of it and can make your own judgement.

The group asserts that various individuals and/or organisations either failed to act professionally or in some cases acted negligently or unlawfully in relation to the management or scrutiny of the EEA Life Settlement Fund.

David does not currently wish to be more specific in the public domain about the identity of these individuals or organisations nor about the potential legal causes of action save to note that they relate to activity spanning several years and to allegedly culpable failures in relation to the raising and distribution of funds after the 2013 re-structure.

David also told me they already have many signed up members, with significant committed funds and an experienced “action- group” management and legal team, with a track record of success. The group will apparently go public in mainstream media very shortly and is currently focussed on recruiting members.

There remain a number of unanswered questions and in my view, it will only be reasonable to make a judgement on whether the allegations are justified, whether best practice was ignored, or whether those involved are exonerated, once the answers to these questions (including the identity of the targets) are provided. However, those who participate may expect to share in any damages awarded or settlements made in return for a capped financial contribution and I am assured by David that any potential defendants or their insurers will have the necessary means to make reparation.

The group website can be found onwww.EEALIT.com or you can contact David directly at info@EEALIT.com

Media enquiries about the Litigation Group should be made directly to Lawrence Dore (Davidson Ryan Dore – DRD) at +44 (0) 20 7529 9218.

With David’s permission, I may pass on further information here if it seems significant and appropriate.

House of Commons to vote on FCA failings

Money Marketing reporter Sam Brodbeck yesterday ran a story announcing the long overdue debate on the organisation that delivered a torpedo into your savings back in November 2011, the UK Financial Services Regulator.

Sam explained; Conservative MP for Aberconwy Guto Bebb will table the motion “this House believes that the Financial Conduct Authority in its current form is not fit for purpose and we have no confidence in its existing structure and procedures.”

MPs will vote on the motion at the end of the debate. He is supported by Treasury committee member and Labour MP John Mann and SNP MP and pensions spokesman Ian Blackford.

Whilst the prospect of justice for EEA investors may be more remote than ever, I did feel motivated to relay the facts of our case to the MPs putting forward the motion and I enclose below my communication to them. There were 557 investors on the ECHR application representing a total claim of just under £70m but my note reflects only the number currently subscribing to this website.

If you continue to feel outraged by the behaviour of the UK Regulator and are motivated to make your views known in advance of this debate, you will find the contact email addresses after my message.

Dear Gentlemen

I represent a group of around 300 investors who were denied access to their funds as a direct consequence of the actions of the then FSA in November 2011.

Since that time we have made our case to the FSA Complaints Team, the Complaints Commissioner, the FCA, the Treasury and following consultation with an international lawyer, to the European Court of Human Rights.
It is clear that the investors will not be compensated for their losses but if you intend to table a motion that the FCA in its current form is not fit for purpose, and that you have no confidence in its existing structures and procedures, we can provide evidence to support your motion.

The FCA should not enjoy the exemption from liability that would serve as a safeguard to ensure best practice and it is clear that the complaints procedures are inadequate and lack independent scrutiny. That they appoint their own Complaints Commissioner with no power to enforce is a serious failing in corporate responsibility and a signal to the industry that lip service is acceptable from the office that should properly be a beacon of best practice.

It is also clear from the number of unprofessional press statements made over the years that the FCA fails to recognise the impact of its announcements or worse, recognises but fails to mitigate the harmful consequences for savers. They lack the necessary internal processes to protect consumers and when the Treasury is asked to intervene, consumers are informed that they have no authority to do so and such matters are for the board of directors at the FCA. The office of financial regulation should no longer operate as a pseudo-private company, it needs to be an integral function of the Treasury with its apparent autonomy removed.

As a saver who lost access to a large portion of my life savings when incorrect and unprofessional announcements were made by the Regulator creating a run on an otherwise sound fund, I (and thousands of others) have completely lost faith in the regulation of financial services industry. The impression I have is of an industry club run for the benefit of its members rather than consumers.

I very much hope your motion succeeds and if you require any further evidence or statements, please do not hesitate to contact me or the two IFAs copied; Ian Coley and Terence O’Halloran.

To:
office@gutobebbmp.co.uk
john.mann.mp@parliament.uk
ian.blackford.mp@parliament.uk

New Complaints Commissioner – Same old Injustice..

Anthony Townsend may be making the right noises about his appointment as Complaints Commissioner to the FCA but noise alone won’t have any impact on their maverick behaviour.

The new Financial Services Complaints Commissioner, Antony Townsend

“Throughout my career I have been struck by how easy it is for organisations to inadvertently cause a lot of misery.”

We can all relate to that comment, but he remains tethered by precisely the same old constraints as predecessors who failed to share his concern for those individuals damaged by the FSA or the misery inflicted upon them by the Financial Services Regulator. This new Commissioner still has no power to instruct the FCA to make reparation for their mistakes (however damaging), they remain immune from liability in damages, the FCA can still ignore his findings completely and the idea that embarrassment is any kind of deterrent, given their past behaviour, is childishly naive.  Wake up Anthony, they simply don’t care!

The infamous statement by Margaret Cole that suspended the savings of thousands of ordinary investors was a direct result of her total lack of concern about the ordinary people she, and the FSA were there to protect. Anthony is right when he says;

“In one sense I do have to take emotions out of it, but taking account of impact is important. In the course of enforcement action, for example, a regulator might have to do some quite nasty things, but it has a duty to do it in a way that limits the collateral damage as far as possible.”

But we all know that no effort will be made to limit this collateral damage or apologise to those of us who have suffered at the hands of an unaccountable regulator. Just as the collateral damage to the reputation of the UK’s Financial Services industry will continue unabated by the nonsense of this cosy, worst practice.

Complain to the GFSC

I suggest that each and every continuing shareholder who is concerned about the risk of making a redemption request to EEA before their September deadline should contact the Guernsey Regulator and ask them to intervene on our behalf.

You can either telephone (anonymously if you wish) the whistleblower line: Whistleblowing line: +44 (0)1481 748094 as decsribed on the following link: http://www.gfsc.gg/The-Commission/Complaints-And-Standards/Pages/Whistleblowing-line.aspx or you can send them a message on the following link: http://www.gfsc.gg/The-Commission/Pages/ContactUs.aspx

I shall be doing so and informing them that last time redemption requests were allowed by EEA they devalued the fund after everyone made their requests. Insufficient notice was given to allow people to withdraw and consequently redemptions were made at a value not agreed by investors. We are entitled to be told what value any redemption will be and be assured that a repeat of the last fiasco will not occur after irrevocable redemption requests have been made.

Don’t be harassed into making a decision without the relevant information.

End of Redemption Lock Up Period – What to Do?

The last time continuing share holders were offered the chance to redeem 5% of their holding, EEA subsequently devalued the fund and promised we would have a chance to reconsider our redemption requests. I did reconsider but according to Old Mutual (Skandia), who held my shares:

“We received notification of whether we wanted to continue with the deals on 30th January and we have to reply by 2nd February so this did not permit us any timeframe in which to contact any clients regarding this. Just to give you an indication we have over 280 deals in place for this redemption period and we had to keep all deals in place as the next dealing would not be until 2016. With this many deals the default would have been to continue with the redemption and not to cancel all the deals.”

It’s also worth pointing out that 30th January was a Friday and that gave only the weekend (when they were all closed) before a reply could be made on Monday 2nd February. I have complained about this decision as it is not what I wanted and I was led to believe I would be contacted so that I could make my own choice. But Old Mutual, and everyone else, should not have agreed to the EEA timescale, they should have pushed back on the grounds it was totally unreasonable.

Here we are again; being asked to make a decision before September 25th on whether we wish to redeem any or all of our EEA investment without being told how much that redemption will be worth. Will it be based upon the original maturity value of the underlying policies as we have been assured they haven’t changed, will it be the discounted value that was supposedly only put in place to cater for early redemptions, or will it be subject to a further re-valuation (doubtless downwards) to be made at the last-minute before pay-outs?

I would urge you all to contact EEA and/or your intermediaries stating that it is unreasonable to ask anyone to make an irrevocable decision without knowing this fundamental information.

If you plan to attend the AGM, please also request that, unless a satisfactory answer is given beforehand, this matter is put on the agenda.

Latest FCA Back-Track

You might think that by branding Life Settlements as toxic and Ponzi-like the FCA were casting aspersions on the credibility of these investments.

Well apparently not, in a letter posted from the FCA yesterday to an investor who dared to complain, they told him “we haven’t said we don’t believe it’s a credible investment.”

Or to put it another way, the FCA believe that a toxic and illegal fund might still be credible as an investment.

They went on to inform him they would not respond to any further dialogue from him.

Yet again the FCA proves beyond any doubt that it is out of control and treats consumers with contempt….  and the Treasury Select Committee continues to sit on its hands.

Investment Risk – How do you quantify it?

As a recent article published in The Telegraph demonstrates, risk can be a highly subjective component of any investment.

The basis of the majority of claims made against independent financial advisors (IFAs) seems to be that they mis-sold to clients because they failed to adhere to the client’s risk profile. But what do we mean by risk and is the term applied generically across the financial services industry?

When I studied complex systems for my degree there was a pretty straightforward starting point; understand the impact of a failure and the probability of it occurring and you can start to understand the risks.

Impact

Premium Bonds are regarded as one of the lowest risk investments because your capital remains intact even if you never win a prize. At the other end of the spectrum, entire investments can be lost when a Hedge Fund goes bust. The impact of failing to win a prize is clearly far less worrying than losing everything put into an investment.

So when the Financial Services Regulator encouraged consumers to take action against IFAs for mis-selling the EEA Life Settlements shares and branded them as high risk, where did EEA sit on the scale? Well given that the fund was based on life insurance policies that the US Government obliges insurers to make available for a secondary market, and the policies were underwritten by some of the world’s largest insurance corporations, the capital amounts invested should have been secure. In fact the only erosion in the value of capital was the amount of premiums paid and the management fees taken once each policy was purchased. Both of these factors were predictable but in this respect the investment could not be described as quite as low risk as, for example, Premium Bonds. But then very few investments are.

The risk with EEA Life Settlements shares was overwhelmingly about the magnitude of gains once premiums and fees were deducted and not about the loss of the underlying policy values. Not Premium Bonds, but certainly on the low risk side of scale as opposed to Hedge Funds or more speculative investments.

Probability

Even if the consequences of a fund failing are low, we rightly also consider the probability of that occurring. None of us would place our savings in a fund that was highly likely to fail. Although for many there may be an increasing desire to find safety by placing our savings in low or zero growth funds in order to avoid the uncertainty of financial markets.

To understand the probability of a failure, we were taught to study those factors which influence an entity, both in its immediate and extended environment. We would then conduct a detailed risk analysis. In the case of EEA Life Settlements, the probability of the fund crashing was extremely low because almost all the factors in its environment were detached (it was sold as uncorrelated because the performance of stock, currency or commodity markets had no impact on the fund). Life Insurance corporations might have failed to meet their obligations but the risk of this occurring would be no greater than large banks or even governments defaulting – it happens, but it’s thankfully rare and if we judged all investments exposed to this risk as high, every investment under the sun would be in that category.

The only real risk in EEA Life Settlements related to the magnitude of any gains with a very small risk of capital depletion if every policy holder outlived the life expectancy analysis (carried out by qualified physicians) by a considerable margin. Even if the fund had been badly managed, the underlying policies represented a rock solid asset.

In November 2011, it was accurate to describe EEA Life Settlements as low risk.

But then in November 2011 nobody could have predicted what would happen next.

The analogy that springs to mind is of a pedestrian crossing the road. There’s a risk which is largely determined by the traffic on the road and the common sense of the pedestrian, but we rely upon traffic controllers to mitigate that risk by implementing safeguards. What you don’t expect is a traffic control helicopter to target the pedestrian and deliberately land on top of him or her.

You could argue about whether the EEA Life Settlement fund was in a quiet country lane or the high street but prior to November 2011, when the traffic helicopter of the FSA landed on the fund, it was safe – it was certainly low risk.

It’s unfortunate for those who would like to take action against their IFA for mis-selling (as a consequence of risk) but the only thing that changed the risk status of the EEA Life Settlements Fund was the action of the FSA – the traffic police. The action of the regulator exclusively and retrospectively transformed the fund from low to high risk.

Another analogy; worrying lending decisions are discovered at 3 or 4 small banks. The regulator declares the banking sector to be on the verge of a solvency crisis; a run on all banks follows forcing the doors to close and access to all cash denied. Would it be reasonable to brand Barclays, HSBC or NatWest as high risk before this intervention? In the Life Settlements industry, EEA was the largest fund operating in the UK and one of, if not the, largest in the world.

At least we know that if the banks fail, tax payers will bail them, or if the FCA makes reckless comments about the insurance sector, millions of pounds will be spent on independent reports and officials will be too embarrassed to accept their bonuses.

What is the risk, I wonder, of our new administration doing the right thing for ordinary savers?

Latest Media Cover

Click to Enlarge

 

The latest and hopefully the first of a flurry of articles to appear in the Press publicising our claim against the FCA. Steering committee member and financial author Terry O’Halloran questions the sanity of a system that leaves consumers having to fight the organisation that is supposed to protect them, in the European Court.

It’s a great shame that the cost of this wholly avoidable action will once again be picked up by UK taxpayers but left unchallenged the FCA would simply continue to act as if accountable to nobody.

 

Consider this whilst we wait for a reply..

There will inevitably be a short period without news whilst we await a response from the FCA to our claim.

As we wait, and anticipate the finer points of law that will no doubt be called upon as the case progresses in the European Court, I find it interesting to compare the position of the FCA with that of the Treasury on tax evasion. On the latter, we are told that individuals and corporations should not simply adhere to the letter of the law, but to the spirit.

Does anyone really doubt that the FSA was wrong to brand Life Settlements funds en masse as toxic and compare them with illegal Ponzi schemes? Does anyone doubt they acted unlawfully by issuing Guidance without prior consultation and without informing the Treasury?

I’ve been struck by just how many high-powered legal and financial experts, in addition to the legions of us ordinary savers, were damaged by the FSA’s actions. Could they possibly argue that they publicised their concerns  sufficiently widely for everyone to be aware of them and that the sledgehammer they used to crack this nut was somehow justified?

No doubt their expensive lawyers will do just that, they will ignore the spirit of the law, ignore natural justice, and deploy as much legal jargon as they can lay they hands on to avoid doing what everyone knows is the right thing.

Final 12 Hours to Deadline and Claim Reaches £57m

With under 12 hours left before the deadline for registrations, the total value of the claim has reached £56,987,719.

Five hundred registrations have been accepted for the Class Action amounting to just over £44m and the loss of income is calculated to be in excess of £12.6m.

Since launching the action on 2nd January 2015, we have tried to reach as many investors as possible and we would like to thank Skandia and all the IFAs who have done their best to spread the word. We would also especially like to thank David Trinkwon and his EEA Investors Group for doing a great job informing people and answering queries. Unfortunately EEA did not co-operate and as a result, many investors may have lost the opportunity to participate, or at least decide for themselves if they wish to do so.

During the past weeks, we’ve done our best to handle queries but in the last couple of days it has been difficult to give the detailed responses that some have required whilst coping with the large number of registrations coming in. In particular, questions have been asked about our indemnity clause and I would like to explain that the sole purpose of this clause is to protect those of us who are working on your behalf from being sued for our actions or inactions whilst working on this Class Action. Unfortunately the times we live in require us to include this protection. It is only intended to relate to the Class Action and has no bearing on the limitation of your costs in the initial action. As previously mentioned there will be no cost to investors unless we secure a settlement and the current maximum contribution (to be deducted from the settlement) if we are successful in this stage is under £20 including VAT.  If, as we expect, a second stage of action in the European court is required, nobody will be committed to participate in this and the details of funding that stage will be announced at a later date.

We have also been asked to name the lawyer acting on our behalf in this case. He is currently abroad concluding another case and has asked us not to give out his details whilst he is away. I think this is entirely reasonable and quite clearly his details will be in the public domain as soon as we formerly commence the legal action.

Thank you to everyone who has (or is about to) joined this action. We are as convinced as the day we started that we have a strong case under Human Rights Law and also under UK law but the latter provides no remedy due to the iniquitous immunity from prosecution behind which wrong doers in the FCA can seek refuge.

Thank you also for understanding that I am no lawyer or financial expert and whilst I have tried to conduct this process as fairly and efficiently as possible, it may have been very rough around the edges! We could have employed a bunch of professionals to do this but I suspect that you, like me, would object to introducing additional costs.

After today, I will go quiet for a few weeks as I’m about to move house and there will be a period between moving out and moving in when my wife and I will be nomads imposing upon the good nature of our children to put us up – or put up with us –  depending upon your perspective!

Although I will be unavailable during this time, my colleagues on the steering committee will be busy on your behalf and our lawyer will be back and working on this case in a few days.

Emails coming in to me after the deadline tonight will automatically receive an ‘out of office’ reply until I’m set up in our new home in March.

 

 

 

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