The Financial Services and Markets Tribunal (FSMT) ruled this week that although L&G was guilty of mis-selling mortgage endowments, it was not to the extent the FSA had claimed.
The Tribunal said that out of the 60 cases the FSA had claimed as mis-selling, only eight were proven, while 25 were too unclear to decide. The FSMT ruled 14 cases as potential cases of mis-selling and 13 as unlikely to be cases of mis-selling.
The Tribunal also stated that the FSA’s £1.1 million fine against L&G should be reduced.
In light of the verdict, commentators believe that the quality of the FSA’s investigatory procedures and enforcement have now been thrown into greater question and will give companies greater confidence to challenge the regulator in the future.
Mike Fitzgerald, sales director at Brentchase Financial Services, said: “I admire L&G for not falling over and simply taking it when the FSA pulled it up for allegedly mis-selling endowments. It’s a shame other companies didn’t do the same in the past.
“But this will show firms regulated by the FSA that its word is not gospel and can be challenged successfully. This will give more incentive for firms to fight the FSA if they think things aren’t right.”
Kevin Morgan, managing director of Consilium Financial Planning, commented: “I would like to see more big companies taking on the FSA, if only to clarify any uncertainties about the regulator’s policies. It is difficult for smaller firms to challenge the FSA due to costs and time.
“The FSA has almost become a law unto itself. It is there to make policies but the only way to change them is to challenge it. This ruling will give some firms the heart to do this.”
The Tribunal concluded that L&G’s own procedures had failed to guarantee that customers understood the risks of taking on these endowment products but that the mis-selling was not widespread or systematic.
