6 May '03 - Letter from Alec Henney to John Tiner of the FSA

Dear Mr. Tiner,

I respond to your letter of 16 April. I note we have fundamentally different styles of writing. I put specific points, and you respond with generalities. If you disagree with my assertion in my submission to Penrose that the FSA has done nothing for the generality of members of the Equitable, perhaps you would let me know exactly what you think the FSA has done for us so that I can share some good news about the FSA with the members of EMAG.

You mention regarding the provision of information that "relevant factors [to take account] include the benefit to policyholders of having the information, the ability of the firm to provide it and the cost of doing so (particularly when those costs will be borne by the policyholders)":-

• the members of the Committee of EMAG are or were policyholders of the Equitable who have lost tens of thousands of pounds. We know what information we require. We asked your help to get us what we want
• the company has all of the information we want, and it could be put on the website at negligible cost. How much do you think it would cost to put the number of members of the Society in the Annual Report? Your comment about cost is perhaps inappropriate in the light of the £ms the Society spent on employing Burson Marseller, which too often produced spin and obfuscation
• I did not imply that Equitable Life has "fallen way short of industry standards in the information that it provides to its policyholders". It is part of an appalling industry which has been inadequately regulated in many respects, including the requirement to provide adequate information. I also refer you to Sandler on this point. What I said was that 1) the Equitable is the industry's basket case; 2) the FSA appears to be acting as a surrogate director; 3) given the past inadequate handling of The Equitable by the FSA, the very least you could do is to help us to get the information we want. In your With-profits study you have spent a great deal of time reaching obvious conclusions - all we want is that you require The Equitable to introduce "best practice" now, rather than wait for the inexplicably lengthy processes the FSA seems to operate

Regarding the governance of big life mutuals (which your predecessor Michael Foot agreed was a concern), the FSA could have taken the initiative and made representations to the DTI about the need for special provisions in the Bill on "Modernising Company Law" related to the governance of such large mutuals. Even the board of the Equitable has finally recognised some of the shortcomings in the governance arrangements which we pointed out, and is proposing changes. But no thanks to the FSA.

I imagined you listened to the recent Money Box programme and read the FT article "Monster task baffles watchdog" of 19 April. The time is overdue to split conduct of business regulation from prudential regulation because of the potential conflict of interest, which was realised in a big way with The Equitable.

I am circulating relevant parts of our correspondence to various journalists.

Yours sincerely,

ALEX HENNEY
Chairman of EMAG