The independent action group for current and ex Equitable Life policyholders, funded by contributions.

Equitable Members Action Group

Equitable Members Action Group Limited, a company limited by guarantee, number 5471535 registered in the UK

Correspondence: 25/01/2002 - to John Tiner, FSA

38 Swains Lane
N6 6QR.

Mr. John Tiner
Managing Director
Financial Services Authority
25 The North Colonnade
Canary Wharf
London E14 5HS.
T: 020 7676 1000
F: 020 7676 0030

25th January, 2002.

Dear Mr. Tiner,

I imagine you read the Economist, and equally I imagine you take a more than professional interest in the difficulties confronting Andersens following the collapse of Enron. You very likely therefore read the first leader in last Friday's Economist titled "The real scandal". It observes:-

"The capital markets, and indeed capitalism itself, can function efficiently only if the highest standards of accounting, disclosure, and transparency are observed".

My colleagues and I on the Committee of EMAG considers the same applies to mutuals. Just conceivably, if Equitable has been open to proper scrutiny by its members, the debacle under the previous board might have been avoided. As I drew to your attention in my letter dated 18 January, Treves and Thomson are continuing where the old board left off. I am not alone in first resenting having some £200,000 of my money for my pension locked (through the MVA) into the stewardship of people who in their drive to reach compromise have failed to act equitably in the interests of the majority of the members of the Society, the non-GARs. Then, to add insult to injury, they have the impertinence to refuse to disclose to me and my fellow policyholders the financial circumstances of the organisation of which I am minimally a part owner, and have obfuscated a number of issues.

One issue which has been infuriating us has been the refusal of Treves and Thomson to provide us with information about the review that led to the cut in policy values of 16% last July. They have given us the following patently specious reasons:-

  • "it would be too expensive" - in the context of £4,000 million, too expensive?

  • "it would involve too much work" - the directors must have had a summary. (We were told there was no directors' summary, but find it less than credible that the directors took a £4,000 million decision without supporting paperwork);

  • "the press would misinterpret it" - but even if, which is extremely doubtful, this was true, it should not prevent the publication of information to which the members are entitled;

  • "it would assist claims against former directors or advisers" - is it not the current board's job to pursue those who have committed braches of duty, not to protect them?

  • "the auditors would not allow it" - why not; and who pays their fees?

  • "no other with profit office does it" - no other with profits office is in the mess in which ELAS finds itself and is trying to compromise with its policyholders

We can think of two reasons for withholding publication of the Review - one more charitable and the other less charitable. The more charitable is that Thomson has an attitude problem. Namely he reflects the mores of the cosy, paternalist and protected little club world of Scottish actuaries. They share much more information with each other than do their English counterparts, but the idea that they should share information with members has not thus far crossed their insulated minds. A leading financial journalist told me his current attitude is consistent with how he behaved previously when he was in Scottish Widows. The less charitable reason is that it would embarrass Thomson because last March he not only put his name to a bonus declaration of 8% but also failed to take action from 15 January to 16 July when ELAS was paying 15% too much to contractual leavers at a rough cost of £200m to those who remained1. Did the Review expose this as his misjudgement? Whatever the reason, we have the suspicion that their refusal to publish the review indicates that they have something to hide. And we doubt very much that what they are hiding would breach the criteria in Treve's pledge that "members are entitled to know everything about how it [i.e. the Society] is run unless open disclosure would be commercially confidential".

I am awaiting with interest whether Thomson will respond to my request for the latest information which I asked him for, namely when and how the deadline of 1 March came to be (I alluded the matter in the footnote of my earlier letter to you). Will I get a reply? If so, I fear that it will reiterate one or more of the specious reasons that he has advanced to date for not providing other information to the owners of the Society?

As I said before, I hope the FSA will do something to help the members of Equitable to better understand the management of the Society we supposedly own.

I copy this letter as last time.

Yours sincerely,


PS. Another example of the "openness policy" and how the Society treats its members was shown by the attitude the Society took to providing us with the brief for the Independent Actuary which you (incorrectly) thought per your letter of 27 November to Paul Braithwaite would be included in the compromise document. They refused to send it to us and told us that it was at Lovells. Lovells said that we could come in and see it. A middle aged lady went to Lovell's office and was not treated at all hospitably. She was sat in the lobby, not offered a cup of tea, and generally made to feel unwelcome. She was made to transcribe longhand 15 pages with the pad perched on her knee. They refused to let her photocopy, to allow her to photograph or to use her laptop to transcribe. It took her 3 hours. Is this what Thomson means by wanting "to run the Society in a more open and accountable manner".

1If a £100K policyholder left on 1 January 2001 only 90% of his Policy Value was covered by assets. So if he did not suffer a 'Financial Adjustment' he got about 10% more than he should have done and the cost to the rest of us was £10K. If he left on 30 June 2001 the cost would have been about £20K, being 4% interim bonus for 2001 and 16% asset deficiency. In very broad terms, policyholders leaving in the first half of 2001 got on average about 15% more than their fair share. The accounts for that period show that contractual leavers (i.e. those going without a Financial Adjustment) got £1,400 million and thus received over £200 million, which was not represented by assets. This cost falls upon the rest of us.