A Lesson on how to mislead the public from Sir Anthony Holland

In 2012, the FSA Complaints Commissioner (Sir Anthony Holland) found against a complaint that the FSA had behaved unprofessionally in publishing a statement branding TPLIs as ‘Death Bonds’ that were toxic and Ponzi like. Despite the fact that the FSA subsequently agreed these terms should not have been used, Sir Anthony implied that the statement had been vetted by a number of TPLI providers prior to its release.

 

” I would like to add that, from the information provided to me by the FSA, it is clear that it was in correspondence with a number of TPLI providers before its statement of 28th November 2011, and that these providers did not object to the publication of the statement. As such, I do not believe that the FSA has acted in an unprofessional manner as you suggest.”

Sir Anthony Holland
Complaints Commissioner
16th January 2012

 

In order to agree with a statement, one must actually read it or at least be fully aware of its content.

Following repeated requests under the Freedom of Information Act, the FCA have finally conceded that the TPLI providers referred to by Sir Anthony Holland did not see the statement at all prior to its release. All they actually agreed to was the idea of a planned consultation.

“The FSA did not provide those three firms with early sight of the text of the draft guidance itself or the press release, since the publication was itself to be the consultation exercise.”

Information Access Team
Financial Conduct Authority
14th August 2014

There is the world of difference between agreeing with a consultation process and agreeing with an inflammatory statement prior to its commencement. It was indefensible for someone in Sir Anthony’s position to imply that agreeing with the former indicated approval of the latter. According to the FSA themselves, what the TPLI providers actually said about the statement when it was published was very far from approval.

“When publishing the guidance consultation, the FSA should have taken into account the possible impact of its warning on existing TLPI investors as part of our statutory objectives of consumer protection and maintaining market confidence;
· many felt that the use of the terms ‘death bonds’ and ‘toxic’ were overly emotional and inflammatory;
· we should not have said that certain TLPI models carry risks that make them appear to share some of the characteristics of Ponzi schemes.”

And how did the FSA respond to this feedback?

“We accept that the expression ‘toxic assets’ has been used in the press in relation to financial instruments such as CDOs and CDSs and that our use of it here may have led to some confusion for some customers.

This does not mean that we have found that some TLPIs are Ponzi schemes and no such allegation is made in our guidance or accompanying communications,
nor have we said that this is a trait common to all TLPIs. We will, however, update the wording of the guidance on this point to clarify our meaning.”

Summary of Feedback Received
FSA Consultation Period 28th November 2011 to 23rd January 2012.

The eagle-eyed among you will have noticed that Sir Anthony’s response was sent on 16th January 2012, a week before the consultation closed and feedback from the TPLI providers was published.

There is no evidence whatsoever that any TPLI providers approved of the FSA statement before or after its release. The statement that they did not object to it was misleading, untrue, and as unprofessional as the statement itself.

The consequences of this unprofessional behaviour have been severe for many ordinary savers. As three legal cases get under way, pension funds are liberated, and the privatised FCA continues to drift further from any form of Government control, we must face the reality that savers can no more reply upon protection from the sharks in authority than the sharks who would steal their savings.

Use your vote wisely in the elections next year, if you feel confident enough to use it at all.

 

Reform the FCA http://epetitions.direct.gov.uk/petitions/63482

 

Privatisation of the UK Treasury?

Following a number of letters to local MPs, the Treasury is finally playing the ‘nothing to do with us’ card. They are claiming that the FCA is an independent non-governmental body and that they have no influence over it’s business practices. Anyone who objects to the current vogue of privatising everything from the NHS to Child Protection should see the admission as ultimate evidence of the fatal flaw in this policy. Will the opposition parties and the media get off their backsides do something?

If the FCA is outside of government control and it appoints its own complaints commissioner, the government has cast adrift all control over the entire financial services industry in the UK. I think I’ll read that again more slowly – the government has cast adrift all control over the entire financial services industry in the UK.

As for the detail of the responses given by the Treasury to enquiries from investors and MPs, rather than investigate the complaints made, they have fobbed them off with standard text letters. Although the replies are supposedly from different individuals in different departments within the Treasury, they consist of identical paragraphs no doubt picked from a library of pre-approved words to dish out to anyone who questions their governance.  Perhaps the UK Treasury will also be privatised, they seem to be adopting the same low standard of customer service as the FCA.

One of the complainants had the audacity to question why, having written to the FSA in 2010, they neglected to warn him that they harboured concerns about TPLIs or offer any advice whatsoever until it was too late. Earlier in the same year (February) the Head of Investments at the FSA promised that they would intervene in the TPLI sector for the protection of consumers.

I hope that those who have been dealt with so shabbily by the Treasury will complain to their MPs and challenge them for accepting this fobbing off.

However, there is one chink opening in the armor of the FCA.

The standard paragraph in which they attempt to avoid any suggestion that compensation should be paid states that they cannot provide immunity from liability for damages awarded in respect of a breach in the Human Rights Act.

Treasury Wording

“lf you feel that there has been a breach of the Human Rights Act, it may be helpful to
explain that although the FSMA provides immunity from liability for damages for the FCA,
this immunity does not extend to acts or omissions to be in bad faith, nor does it extend to
damages awarded In respect of a breach of the Human Rights Act.”

The basis of our claim all along has been that the right to the peaceful enjoyment of our possessions (which includes savings) was breached.

The Human Rights Act 1998 Section 6(1) states that ‘it is unlawful for a public authority to act in a way which is incompatible with a Convention right.’ Under Article 1 of the First Protocol, ‘Every natural or legal person is entitled to the peaceful enjoyment of his possessions.’

http://epetitions.direct.gov.uk/petitions/63482

Savers Beware of Skandia ‘Wrappers’

It’s a long story but in summary it appears that Skandia sales were flagging until, in 2008, they appointed the current CEO, Peter Mann, who repositioned the business away from being a reputable investment product based company to service based company. Put simply, what this meant was re-packaging and selling other people’s products rather than investing in their own. Put simply, what it meant to savers was washing their hands of the responsibility for the products they sold whilst trading on their previous good reputation.

The transition was enabled by introducing a mechanism called the ‘wrapper’. This allowed them to include products that ordinarily would only be available to experienced investors  and sell them through general retail. The EEA Life Settlements fund was and is such a product. Retail, non- expert, investors rely upon their IFAs for guidance but most IFAs, especially the smaller firms, are not party to the same market intelligence as companies the size of the Skandia group and are rarely, if ever, invited to the cocktail parties and presentations at which the regulators convey their sentiment about various investment classes. The result being that those individuals who invest in Skandia wrappers are hung out to dry when things go wrong because nobody warns them.

In December 2006 the former head of supervision for the Financial Services Commission of the Isle of Man said of such funds, ‘They have found a way, as a result of insurance wrappers, into a marketplace they were never designed for and into the hands of investors who, it would seem, haven’t had the risks properly explained to them.’ 

In 2006, Skandia’s current boss ran Bankhall, (guess what a services company!) where he was an active member of AIFA, lobbying the FSA and taking part in panel debates on key industry topics. So you might think he would be aware of the danger when he introduced the strategy to Skandia in 2008.

To this date Skandia continues to market wrappers and their growth in sales and profits have soared.

They decide which products may be included in their wrappers but leave it up to the (often inexperienced) savers and their IFAs to select from within their range. So what would happen if they became aware that a product within their wrapper range became unsuitable? Or what would happen if the product supplier went bust? What would happen if they found that a product was no longer legal?

The answer to all these questions is the same; nothing would happen. I asked Skandia under what circumstances they would remove a product from their wrappers (known as their CIB or collective investment bonds), even giving the above examples, and their response was that no action would be taken and no product would be removed. In their words:

“A fund would only cease to be available through the CIB if it no longer met (1) the definition of a collective investment scheme or (2)  Royal Skandia’s own internal administration requirements, e.g., reduced frequency of dealing.” 

I reiterated my concerns, asked again and escalated my concerns to the senior executive team. The answer was the same. Skandia will do nothing to protect their customers unless a product ceases to meet the definition of a collective investment scheme or becomes a burden for their admin. Customers don’t figure in their criteria.

In fact the protection of customers doesn’t really figure in their grand services strategy either. The whole idea is to shift the risk and cost of monitoring products downstream to IFAs whilst trading on a previous reputation built on an entirely different business model. Needless to say, the FCA sits on its hands, content in the knowledge that IFAs can once again be the scape goat if, or should I say when, things go wrong and savers once again are the losers.

As a new wave of inexperienced investors gains access to their pension funds and the government and FCA plans to ‘automate’ investment advice flounders in disarray, the writing is on the wall.

So if you have, or are considering a Skandia wrapper, you know what to do to protect your savings.

http://epetitions.direct.gov.uk/petitions/63482

 

was an active member of the AIFA panel, lobbying the FSA, – See more at: http://www2.skandia.co.uk/Media-Centre/Our-Spokespeople/#sthash.tXTiuWBf.dpuf

was an active member of the AIFA panel, lobbying the FSA, – See more at: http://www2.skandia.co.uk/Media-Centre/Our-Spokespeople/#sthash.tXTiuWBf.dpuf

IFAs under attack from FCA – again!

IFAs under attack from FCA – again!

FCA boss Martin Wheatley has yet again engaged his mouth before his brain by hitting out at IFAs and others in the financial services industry for failing to be innovative and “sitting on their hands”. What he would like is for them to mis-sell so that he can then blame them and justify his huge salary. He clearly couldn’t give a monkey’s about the people who lose as a result of “innovation” as long as there are expendable front line troops who can be blamed when things go wrong.

Next week he’ll be lecturing those who do take risks for their gung-ho behaviour.

Reform the FCA now!

http://epetitions.direct.gov.uk/petitions/63482

FSA used a sledgehammer to crack a nut!

Public authorities have an obligation to treat people in accordance with their Convention rights. Everyone has the right to the peaceful enjoyment of their possessions – that includes their savings in TPLI funds!

On page 55 of the Ministry of Justice Handbook for Public Authorities, a clear obligation is set out for public authorities to weigh carefully the rights of individuals when embarking upon a course of action that will interfere with their human rights.

The FSA knowingly interfered with the human rights of existing savers in TPLI schemes when it made an announcement in November 2011 incorrectly branding them as ‘toxic’ and ‘ponzi like’.

That they did so knowingly is a matter of public record (Proposed guidance on traded life policy investments: cost benefit analysis – FSA 2011) and they have subsequently conceded that their use of the terms ‘toxic’ and ‘ponzi like’ were misleading.

As the following references show, before embarking upon a course of action that would interfere with the human rights of individuals (or companies), it was incumbant upon the FSA to investigate and choose only such action that would be least damaging to existing savers.

Despite requests under the Freedom of Information Act, there is no evidence to suggest that the FSA attempted to seek the least damaging course of action but there is evidence that they failed to consult on the wording of their announcement and that they failed to organise any events or roadshows to warn of their impending action or lessen the impact for individuals.

The wording of the FSA announcement in November 2011 was deliberately inflammatory to the extent that inaccurate and slang language was used. As such, the FSA sought precisely to ‘use a sledgehammer to crack a nut’ contrary to the Ministry of Justice guidelines. The conscious choice of this approach was confirmed in their ‘Cost Benefit Analysis’ of the same month.

A number of less damaging alternatives to their announcement existed but these were not considered by the FSA.

In the event that a public authority legally restricts or interferes with the qualified human rights of an individual or company, it is incumbant upon them to pay proper and fair compensation.

Tell your MP! (see letter on this link)

Sign the petition for reform http://epetitions.direct.gov.uk/petitions/63482

 

The Freedom of Information Act

The FCA have now confirmed in relation to the infamous announcement made by the FSA in November 2011:

Date: 23rd May, 2014 “FSA did not discuss their concerns on TLPIs at any FSA organised events or roadshows leading up to the announcement.”

Date: 10th April, 2014 “FSA did not pre-consult on the wording of the announcement.”

 

Human Rights Framework as a Tool for Regulators and Inspectorates

(Ministry of Justice Publication)

The principle of proportionality is at the heart of how the qualified rights are interpreted, although the word itself does not appear in the text of the Convention. The principle can most easily be understood by the saying “don’t use a sledgehammer to crack a nut”.

Human Rights: Human Lives – Handbook for Public Authorities

(Ministry of Justice Publication)

Public authorities have an obligation to treat people in accordance with their Convention rights. Everyone has the right to the peaceful enjoyment of their possessions. 

A policy/decision should be no more restrictive than it needs to be in order to achieve its objective. This is called ‘proportionality’. For example, a blanket application of a policy/decision to everyone concerned will often be considered disproportionate, as it does not take into account individual circumstances, and the individual rights of each person affected. It will have the effect of imposing restrictions in circumstances where they are not really needed. Look at the objectives you identified at paragraph one of this section, and box 1 of the flowchart, and ask yourself whether the objectives can be achieved only by the policy/decision you are proposing. Ask yourself if there is any other less restrictive way of achieving the desired outcome. If there is another less restrictive way of achieving the desired outcome, but you decide not to adopt it, you will need to be prepared to say why you have made that choice. Your reasons will have to be good ones.

The Article requires public authorities to strike a fair balance between the general interest and the rights of individual property owners. Public authorities should take action to secure the right to property, as well as refraining from interfering with it.

Possessions and property has a wide meaning, including land, houses, leases, money and personal property. It also covers intangible things such as shares, goodwill in a business, patents and some forms of licences, including those which allow people to exercise a trade or profession. Entitlements to social security benefits are also generally classified as property.

“For example, if a public authority plans to build a road over someone’s land, it must have laws in place to let it do this. It must also have a procedure to check that a fair balance has been struck between the public interest in building the road, and the individual’s right to their land. It will not normally be fair to deprive a person of their land unless the person can get proper compensation for it.”

Setting aside whether or not a fair balance was struck and all alternatives were exhausted, if it was in the public interest to deprive a people of their savings, proper compensation should be paid.

 

Treasury Committee Reply..

Interesting reply today from the Treasury Committee Chairman, Andrew Tyrie, to the allegations of wrongdoing at the FCA…

“Thank you for raising your concerns. Unfortunately, the Treasury Committee is not currently inquiring into the FCA. However, evidence is taken from the FCA approximately every six months. Upcoming inquiries are announced on the committee’s website “

Ah shucks, the only time they are interested in wrongdoing is when they are actually conducting an inquiry. So that would be never unless you’re a big insurance company!

 

Letter to MPs – Action for all TPLI Victims

Phase Two of the Campaign – Write to MPs

As the number of signatories to the epetition passes 300 and more names are added each day, it is time to turn up the heat on the campaign for compensation and reform of the FCA.

The enclosed letter (see link: Letter to MP ) is intended to be suitable for all victims of the FSA’s handling of TPLIs whether EEA, ARM, Keydata or other funds/organisations.

Not sure who your MP is or how to contact them? Here is a link that will help you; MPs – UK Parliament. You can also write to, or email members of the Treasury Select Committee on the following link; Treasury Select Committee.

Summary

Thousands of ordinary people placed their hard-earned savings into what they believed was a highly ethical and low risk investment vehicle; Life Settlement funds.  The sector had a track record of steady, if not stella performance, and a number of funds within it were either regulated or authorised by the FSA – they had been for several years.

In 2011, the FSA made an announcement that shocked most ordinary savers. They branded the sector  ‘toxic’ and ‘Ponzi like’, referred to the funds as ‘Death Bonds’ and pronounced that they were not suitable for retail investment. By the time this announcement was made, thousands of ordinary savers had already invested in the sector and had been doing so for years.

The announcement directly led to a run on the funds and the unprecedented demand for redemptions resulted in a suspension of trading that denied investors access to their savings and the income they had hoped to receive.

Over two years later, savers are still without access to their funds and are still unable to draw their income.

The FSA Action

The FSA declared that they had harboured concerns about the sector for several years; which begs the question of what they were doing during this time, as more and more savers ploughed their money into the sector. They stated that they needed to instigate a consultation but their derogatory conclusion was announced before the consultation even began.

The FSA published what they called a ‘Cost Benefit Analysis’ to justify their action. In this analysis, which failed to include the costs to existing savers or quantify the benefits to potential future savers, they made clear that they fully anticipated the damaging impact of the announcement they were about to make.

They have subsequently defended the announcement and continued to use the inflammatory language that led to the collapse of several funds.

The Complaints Procedure

Human Rights law states that every person has the right to the peaceful enjoyment of their property, including their savings. It also states that no government body should take actions that interfere with that right unless the common good is greater and they have exhausted less harmful alternatives to the action they are contemplating.

Several of those who have lost access to their savings have complained to the FSA and their successor the FCA. The basis for many of these complaints was the unprofessional manner in which the FSA made their announcement. The FSA were accused of failing in their duty of care towards those they existed to protect.

The FSA flatly refused to even consider these complaints and stated they ‘fell outside the remit of the complaints system’. The only recourse was for complainants to contact the Complaints Commissioner.

The Complaints Commissioner also rejected the complaints and stated that a number of fund providers did not object to the announcement before it was made.

The  Admissions

Following criticism that the FSA began a consultation with an announcement that demonstrated they had already reached their conclusions, the Complaints Commissioner subsequently admitted, “the announcement could be, as you suggest, premature”.

Despite numerous denials when accused of inaccurately describing funds as ‘toxic’ the FCA have finally admitted, “‘toxic assets’ has been used in the press in relation to financial instruments such as CDOs and CDSs and that our use of it here may have led to some confusion for some customers.”

After defending their description of funds as ‘Ponzi like’ the FSA now say, “We should not have said that certain TLPI models carry risks that make them appear to share some of the characteristics of Ponzi schemes.”

And despite the categorical assurance that providers did not object to the announcement before it was published, the FCA now conceded that they “did not pre-consult on the wording of the announcement.”

In addition, they have now confirmed the true feelings of those providers they consulted and it is completely the opposite to that stated. “Many felt that the use of the terms ‘death bonds’ and ‘toxic’ were overly emotional and inflammatory;” And yet the FCA has continued to use such slang, unprofessional terms in the public arena.

It has taken years of badgering and the power of the Freedom of Information Act to get to the truth.

The above statements are not ‘interpretations’ they are committed to print and they prove that the original wording of the FSA statement was inaccurate and unprofessional. They also prove that the complaints system and office of the Commissioner are a sham.

There is more. Not only were the FSA unprofessional in what they did, they were also guilty of inaction. Despite the scrutiny of enquiry, there is no evidence to support the assertion that they contacted the industry to warn providers and allow them to prepare for the impact upon their liquidity. There is also no evidence that the FSA considered any alternative actions to their damaging announcement, contrary to their duty of care and their obligations under Human Rights law.

You Can Help!

Thousands were affected by the reckless announcement of the FSA and the claims for compensation and reform will not be stifled.

Every bit of information, every retraction, every muted apology, has needed to be dragged out of them. Now we need to mobilise the support of a campaigning journalist and any political representatives who have the courage to speak out.

If you know any such professionals, please forward this post to them and ask them to get involved.

Follow on Twitter @ReformFCA

Sign the government petition:

http://epetitions.direct.gov.uk/petitions/63482

Eight Failures in Corporate Governance

Following recent correspondence with the FCA, eight failures in corporate governance have been identified.

1. Complaints relating to the FCA’s legislative functions, including making rules and issuing codes and general guidance, are excluded from the Complaints Scheme (Most of their activities)
2. The FCA appoints the Complaints Commissioner to investigate complaints against the FCA
3. The Complaints Commissioner has no power to enforce any decision or action upon the FCA
4. The Complaints Commissioner conducts investigations based only on a desk based review of the documentation provided by the FCA and the complainant
5. Any recommendations made by the Complaints Commissioner are not binding on the FCA and the FCA is at liberty not to accept them
6. The FCA is exempt from “liabilities in damages”. Neither the FCA, nor any person who is, or is acting as, a member, officer or member of staff of the Authority is to be liable in damages for anything done or omitted in the discharge, or purported discharge, of the FCA’s functions
7. The FCA has complete discretion over prioritisation in the discharging of its statutory duties
8. After a complaint has been dealt with, the commissioner is legally prohibited from revising his decision, even if compelling evidence is presented that proves the decision was incorrect or unjust. So if, for example, a FCA executive lied in order to ensure the Commissioner found in their favour, the Commissioner is legally prohibited from revisiting the case.

The FCA were asked and have confirmed all of the above.

Treasury launches FCA review

It’s only a review of enforcement processes at present, but it’s a start. And it’s an indication of Chancellor George Osborne’s discontent with the maverick practices of the regulator.

Pressure must be maintained to force further reforms of the FCA and bring an end to their unprofessional conduct. Although not directly addressing the concerns of savers, the timing of this Treasury review can only be helpful to the claims of all who have suffered as a result of their incompetence. The full text of the ‘FundWeb’ news article can be seen here:  Chancellor begins to act!

And please remember to tell your friends, family, colleagues and especially any IFAs about the petition –  http://epetitions.direct.gov.uk/petitions/63482

New Complaints Commissioner Appointed

Sir Anthony Holland is to be replaced by Antony Townsend as the Complaints Commissioner on May 1st.

As a FCA appointment, this will probably be yet another drop in from the ‘old boys network’ who sees his role as apologist for the FCA rather than a champion for the consumers they have shafted.

He is off to a predictable start with his first meaningless sound bites; “It is essential that people can have confidence in how the regulation of financial services is undertaken.”

And to add insult to injury; “I want to continue the work of Sir Anthony Holland in ensuring and demonstrating that serious complaints are fully investigated and a fair outcome achieved.”

Meanwhile, the information I requested (under the Freedom of Information Act) about freebies given to FCA staff as potential inducements has yielded a list so long it will take weeks to examine. I may not bother as it is clear that so many companies considered it a sound investment to ‘donate’ countless lunches, dinners, cuddly toys, silver cuff links, bottles of fine wine and Champaign. What did they receive in return I wonder?

If you’ve already signed the petition, and validated your signature by email, perhaps there are others you could ask? Even if you can’t sign, they may be able to.

http://epetitions.direct.gov.uk/petitions/63482