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Last Updated: Friday, 22 April, 2005, 11:32 GMT 12:32 UK
Insurers call on FSA to improve
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Adding up the evidence: The FSA's investigations are under review
Insurers have called on the Financial Services Authority (FSA) to "improve" its investigation and enforcement procedures.

The Association of British Insurers (ABI) accused FSA staff of building cases against insurers to send a tough message to the market.

The FSA is reviewing its investigation procedures after Legal & General had a fine for mis-selling cut on appeal.

The FSA said it would "consider" the ABI's views and respond in July.

Under review

There is a perception that FSA enforcement staff are often intent on delivering a particular message to the market
Association of British Insurers

The FSA set up the review in January after Legal & General's fine for mis-selling endowments was cut on appeal.

The Financial Services and Markets Tribunal, which heard the appeal, concluded that Legal & General was guilty of mis-selling but in far fewer cases than had been presumed by the FSA investigators.

As a result, the tribunal said the 1.1m fine, imposed by the FSA, should be cut. The tribunal has yet to decide what the fine should be.

At the time, the FSA said that the tribunal had upheld its central point - that Legal & General's sales procedures had been "defective" and that this had led to mis-selling.

Message delivered

The ABI welcomed the FSA's review of enforcement procedures as "constructive".

It said that the FSA's Regulatory Decisions Committee (RDC), the body which oversees enforcement, needed to be more open with firms under investigation.

Firms under investigation should have access to evidence and be given an opportunity to respond, the ABI added.

The FSA should "improve" the quality of its investigation work, it said.

"There is a perception that FSA enforcement staff are often intent on delivering a particular message to the market and seek to build a case... to support that message," the ABI submission to the FSA review said.

An FSA spokeswoman said: "We will consider this response with all others we receive and report back in July."

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