The FSA has released the following statement:
The Financial Services & Markets Tribunal (the Tribunal) has reached its judgment in respect of the FSA's case against Legal & General Assurance Society Limited (L&G).
The FSA's central case was that L&G's procedures for the sale of its Flexible Mortgage Plans to 41,000 "low risk" customers between 1997 and 1999 were defective, that these defects led to actual mis-selling and that the level of this mis-selling was significant. L&G denied these allegations and referred the case to the Tribunal. L&G did not accept that its procedures were defective or that any mis-selling resulted from procedural defects.
The Tribunal upholds the FSA's case that L&G's sales procedures were defective and finds that "these procedural defects will have caused or contributed to mis-sales". It has also heard oral evidence from 13 L&G customers and concludes that, in these specific cases, 8 had been mis-sold. The Tribunal notes that: "this represented potential mis-sales of 62% in this group of customers".
The Tribunal finds that the FSA was not justified in this case to extrapolate from a sample to reflect a pattern of general mis-selling, but goes on to state that "common sense indicates that there will have been a fair number of mis-sales beyond the 8 that have been established". The Tribunal also comments on aspects of the FSA's enforcement procedures, noting that: "if L&G was not co-operating in securing a review which could be used effectively for enforcement, it was for the FSA to impose a suitable exercise". The FSA accepts this analysis and intends to use its powers in comparable circumstances in the future to avoid such difficulties arising.
It is clearly right that both individuals and companies should be able to take their cases to a body that is wholly independent of the FSA and the Authority believes strongly that the scrutiny of the Tribunal helps to strengthen and improve the FSA's processes. The FSA will give careful consideration to the Tribunal's observations on its handling of this case and look to identify improvements to its own procedures as a result. This case remains the subject of further proceedings, including a decision on the level of penalty.
