Posted by: Pete | March 14, 2012

FSA Guilty of Bad Practice

You might expect the organisation that polices the financial services sector to be a standard bearer of best practice in its own corporate governance.

Unfortunately, this is far from being the case. The FSA refuses to acknowledge complaints about its own operation and the only escalation is to a complaints commissioner who fails to investigate beyond asking the FSA if they feel they’ve behaved badly. In the unlikely event that they did admit bad practice, the commissioner has no power to instigate a remedy.

This bad practice came to light recently when the FSA decided to open a consultation on Life Settlement companies. Certain companies were strongly suspected of operating so called Ponzi schemes.

Before the announced consultation period concluded, the FSA issued a statement denouncing all Life Settlement companies, an action that directly resulted in the suspension of dealings in one of the largest schemes. As a retiree, I had no knowledge of any concerns relating to this class of investment and I believe the fund in which my retirement money was placed is operated both ethically and professionally. There has been absolutely no evidence to the contrary.

Bearing in mind that the principal objective of the FSA is to protect investors, their action resulted in access being denied to huge amounts of privately held funds. Their premature release of a statement during an ongoing consultation was, to say the least, unprofessional and the wording ill considered. The release gave a clear impression that the professional standards of every Life Settlement company are questionable and it made no attempt to explain that the market, in common with most, contained both poorly run and well run companies.

When I attempted to complain to the FSA about their unprofessional behaviour, I was informed they did not accept complaints of this nature and suggested my only escalation was to the complaints commissioner. He informed me that he was powerless to intervene and in any case did not have the mandate to properly investigate complaints against the FSA, a mandate you might think would be somewhat necessary for a complaints commissioner!

The net result of this incompetence is that I, and I suspect countless others, remain locked out of life savings because of action taken by an authority set up to protect me from precisely this kind of bad practice.


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