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: 27/03/2003 - Alex Henney's letter to John Tiner of the FSA

27 March '03 - Letter from Alex Henney of EMAG to John Tiner of the FSA

Dear Mr. Tiner,

I attach a copy of my recent submission on EMAG's behalf to the Penrose Inquiry.

I wrote the letters to which you responded in the hope

* e.g. your statement that providing later information for the Compromise "would have delayed progress on the scheme while the later figures were audited" is incorrect. Documentation for IPOs include non-audited figures - I am sure that the unaudited figures for September 30 could have been provided by the time of printing - late November 2001.

**I am aware of the 30 day rule. If Equitable had been honest, instead of making up stories about shortcomings in Companies House it would simply have said "We do not have to provide you with the information until 30 May".

that you would treat them as a plea for help from the members of Equitable. Instead I got back a legalistic defence of doing nothing. Some of the points were inaccurate* ; some were paternalistic, expecting us to take on trust the competence of the FSA, and some were mere assertions. I am not going to go through your letter in detail, but would point out that you:-
  1. Implicitly supported The Equitable making misleading statements about the availability of the solvency return to avoid publicity prior to voting in the AGM** . This incident has been part of a more extensive policy by The Equitable of obfuscation and spin, much of which has been designed to either manipulate the members by not providing them with information about the financial circumstances of the Society, or to encourage them to support the board by news-managing bad news, of which the solvency return episode was one of a number (another was not informing the annuitants in November 2002 of the true scale of the cuts in the annuities).

    As people in the FSA no doubt read newspapers, staff must have been aware of the misleading nature of much of what has been said by the Board. Indeed, we would not be surprised if the FSA has tacitly agreed in advance the Equitable's stategy. Perhaps you could explain how the FSA's lax attitude is consistent with its statutory duty under S2b of the Financial Services and Market Act 2000 to promote "public awareness", an objective which "includes, in particular, promoting the awareness of the benefits and risks associated with different kinds of investment or other financial dealing"

  2. Endorsed the Equitable making it impossible for its owners to discover how many other owners (i.e. members) there are. We still have no idea - since June 2001.

  3. Failed to address our repeated requests for the FSA to help us gain information. As is clear from EMAG's submission to Penrose, regulators have consistently done nothing to ensure the provision of adequate information. It requires little or no imagination to work out that The Equitable is the industry's basket case and the FSA has been acting as shadow director. We consider that the least the FSA could do for the members is to require the Society to introduce best practice - now.

  4. Misconstrued my complaint about the MVA and the figures provided about my policy and my wife's policy. Since I, along with tens of thousands Equitable policyholders, do not trust the Equitable's competence, I believe policyholders should be entitled to a simple arithmetical and auditable explanation that states how the value of policies as given in May was reduced through a devaluation to the figures I was quoted in November. I imagine that you would not appreciate receiving a bank statement which provided an opening balance, a closing balance and no arithmetic in between. Yet that was what you thought I should tolerate. You could instruct the Equitable that they should provide all departing policyholders with a simple account on request.

  5. Your assertion that it would be expensive to provide policyholders with the option of converting the value of their policies into a unit linked arrangement provided they give up their GIR is mere assertion - where are the figures? I did not say that the information I "provided shows that Equitable Life appears to have considered this as an option but has concluded it would not be viable".

    *** He commented that "the witness statements filed on these applications contain mere argument or perhaps, with a certain generosity, expert opinion than fact". Thomson provided the majority of those witness statements.

    Following the AGM, Thomson promised Sir Jeremy Lever an analysis of this issue. He has not delivered on his promise more than 9 months later. He merely made an assertion. We put no more weight on assertions by Thomson than did Mr. Justice Langley*** in the recent strike-out case. I suggest the FSA should be able to work out that:-

    • just as all non-GAR policyholders were mis-sold, so too the post 1996 non-GIR policyholders were mis-sold
    • with the fund in a parlous state, there is no way that it can be run as a with-profits fund with any material element of equities
    • the GIR's completely constrain its investment freedom to gilts, which is advantageous now but will not be so in the future

  6. We do not accept the final point you made. Of course the FSA, if it were so minded, could influence the governance arrangements of life mutuals. The FSA could have taken ACTION to ensure that provisions were included in the DTI's Bill on Modernising Company Law to ensure that mutual life offices were accountable to their members.

    Even after the Board's new governance proposals, the members of The Equitable would defacto not be able to call an EGM or de jure table a resolution at an AGM. Thus if they are dissatisfied with the Board's performance they have no way of exercising. In ELAS's shabby proposals to reform governance, Treves ignored a petition by 16,000 members to change the Articles of Association to effect such changes. Your response was again pure "not me guv".

Your letter shows that with regard to conduct regulation, THE FSA CONTINUES TO DO VIRTUALLY NOTHING FOR THE MEMBERS OF THE EQUITABLE. You make compelling the case for separating conduct of business regulation from prudential regulation.

Yours sincerely,

Chairman of EMAG

c.c. Mr. Howard Davies.