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

Press Releases: 17/11/2003 - FSA is not accountable

17 November '03 - Press Release on the absense of Accountability of the FSA

In a submission to the House of Lords Select Committee on the Accountability of Regulators, the chairman of EMAG calls for the Financial Services Authority (FSA) to be made properly accountable, and that prudential regulation should be separated from conduct of business regulation.

The FSA is not satisfactorily accountable to Parliament because it is exempt from scrutiny by the National Audit Office and the Parliamentary Ombudsman. The National Audit Office should be empowered to undertake efficiency studies of the FSA, and that the Parliamentary Ombudsman should be empowered to investigate it for maladministration.

The decision of the FSA after the House of Lords decision on 20 July 2000 to allow The Equitable to remain open, and to solicit new business, although the fund was chronically weak, highlighted the inherent conflict of interest between its responsibility to maintain orderly markets (which generally prevail) and its responsibility to protect particular consumers. People were invited to invest their money on the implicit prospectus that if The Equitable could find a buyer, then they may have reasonable policyholder expectations for their investment. Otherwise, they were in a mess - which is what happened to thousands of new policyholders.

The members of the FSA's Consumer Panel are all appointed by the FSA, which also funds the Panel and set its terms of reference. Similarly, the Financial Ombudsman's Service (FOS), which is effectively a subsidiary of the FSA. These arrangements are markedly different from those for representing the interests of, for example, gas and electricity customers, where "Energywatch" is funded separately and its members are appointed separately from the Gas and Electricity Markets Authority.

The FOS should be an entirely separate statutory organisation from the FSA.

The Financial Services and Markets Act 2000 protects the FSA and its staff from being held liable to policyholders for losses resulting from its negligence. But in France, Germany and Italy the banking regulators can be held liable for loss caused to depositors as a result of the regulator's negligence.

In EMAG's view, the FSA and an independent FOS should be made legally liable to pay compensation when, due to their negligence, consumers of financial services lose some or all of the value of their deposits, investments, or policies.

For further information:
contact Alex Henney, Chairman of EMAG on: 020 7284.4217