29 July 2008 - Press Coverage of the FSA AGM

Equitable policyholders slam McCarthy

By Michelle McGagh, Citywire July 2008

Outgoing FSA chairman Callum McCarthy (pictured) came under attack from Equitable Life policyholders following this month’s highly critical report from the Parliamentary Ombudsman.

Paul Braithwaite of the Equitable Members Action Group (EMAG) said his members had been vindicated by ombudsman Ann Abraham’s report which found the FSA guilty on four counts of maladministration between 1998 and 2001 when the mutual insurer teetered on the edge of insolvency.

‘The FSA should be stripped of the role of consumer protection and should volunteer to be subject to the ongoing remit of the National Audit Office, said Braithwaite

McCarthy said legal reasons prevented the FSA from responding. However, when challenged by an Equitable Life policyholder to explain the legal position he could not.

Equitable critics hit at FSA

The Herald, TIM SHARP July 25 2008

Angry investors who lost out when insurance company Equitable Life collapsed seven years ago yesterday demanded the financial regulator be stripped of its consumer protection role.

At the Financial Services Authority's annual public meeting, chairman Callum McCarthy faced repeated calls to give the regulator's response to a damning 2800-page report by the Parliamentary Ombudsman Ann Abraham which was published last week.

Paul Braithwaite, of the Equitable Life Members' Action Group, criticised the FSA for not addressing the issue.

"The FSA has been found guilty by the ombudsman on no less than five major counts of maladministration."

He added: "The FSA should be stripped of its consumer protection role."

The FSA chairman said that unspecified "legal reasons" meant he could not comment on the report until after the government, which was also found guilty of maladministration, had itself responded to the findings.

Officials at the ombudsman's office said the crucial failure had come in May, 1999, when the FSA permitted a financial re-insurance arrangement at Equitable Life, reputed to be worth £809m, was found to be worthless.

Full compensation would cost the government around £4.6bn for the estimated one million policies held with the mutual society.

Andrew Whittaker, the financial watchdog's general counsel, said yesterday: "It is up to the government to respond to it. It would be wrong for us to respond to it in advance of them saying so."

and

In Financial News.

Paul Braithwaite’s verbal question put to chair Sir Callum McCarthy at the FSA’s annual public meeting 24th July, 2008

“Frankly, I don’t recognise the FSA I’ve heard described here this morning. NO mention of Equitable Life and the Parliamentary Ombudsman’s recent report??

For the past six years I’ve come along to these annual public meetings and asked questions about the regulation of Equitable Life and FSA complacency. I’ve received platitudinous replies from a stream of different executives. Well, finally, my aspersions have now been TOTALLY vindicated, by Parliament’s very own Ombudsman’s Report, last week.

I don’t think that the industry gathered here today will be in the least bit surprised by Ann Abraham’s damning findings. The damage done to this industry by Equitable Life and to the UK’s regulators is incalculable. And it will continue until the Government owns up and pays up and clears the slate.

That well-respected Mail on Sunday financial editor, Jeff Prestridge, wrote last Sunday:

“If the financial regulators showed half the passion for the truth as Ann Abraham does and a smidgen of her diligence, we certainly wouldn’t be in the mess we are in today – where the reputations of the Financial Services Authority and the financial services industry remain in tastters, and trust in both is broken…”

So, here’s my question Mr Chairman:

The FSA has been found guilty by the Parliamentary Ombudsman’s newly published report, entitled “a decade of reulatory failure”, on FIVE major counts of maladministration in the period to December 2001 – which I do recognise was not a period on your watch, Mr Chairman. But it is abundantly apparent from those most damning findings that the FSA’s attitude to protecting consumers is but a poor relative to its overarching preoccupation with maintaining confidence in the industry.

Since 2001, in my opinion at the cost consequence of removing valuable checks and balances, the FSA has been laughably self-policing. Hence, any further sins on Equitable Life have never yet been brought to light. Despite the Tiner reforms and principles-based regulation, the FSA has humiliatingly had to admit to chronic failure in supervision just one year ago in the Northern Wreck.

My own view is that the FSA should be stripped of Consumer Protection, but I recognise that that is a matter for Parliament.

Today, I'd like to suggest that the board of the FSA and the respected incoming chairman, Lord Turner, who I see sitting on my right, itself volunteer that the FSA should become subject to the ongoing and retrospective remit of both the NAO and the Parliamentary Ombudsman, in order to begin to rebuild the almost non-existent public's trust in YOUR organisation, Mr Chairman."