By Simon Gompertz
Bill Moist was told his money was "100% secure"
Investors who had lost their life savings were given a whiff of hope today after the Financial Services Authority brought out a scathing report.
It condemned investment firms and financial advisers, responsible for selling plans which depended on the collapsed US bank, Lehman Brothers.
After a six month long investigation, the FSA came to the conclusion that thousands of investors were victims of misleading promotions and unsuitable advice. It said there were "significant failings" and reported that three large advice firms had been referred for enforcement proceedings.
"It's an absolutely tremendous outcome," enthused Bill Moist, one of the investors who had lost out. "It's a tremendous result for fairness."
Bill, from Chester-le-Street in Durham, had been persuaded by Lloyds Bank to sink £200,000 in a supposedly "100% secure" plan set up by a UK firm, NDFA, but guaranteed by Lehman Brothers. The money came from selling a business built up over 30 years.
Other BBC viewers had lost redundancy payments, legacies and nest eggs, after being lured in by similar promises of "100% protection" or blatant guarantees that the money would be safe.
"It's been an unbelievable worry," Ramon Modiano told BBC2's Working Lunch, "I have been very seriously affected because the £50,000 I invested was a large chunk of my savings."
Mr Modiano, from London, was relying on the funds because of poor health and shrinking income from his profession as a cartoon illustrator. He had been advised to invest the money in another "protected" plan, from Defined Returns Limited or DRL.
"I have been living and breathing this for the last 13 months," he added, "I was on holiday in Spain when Lehman went under. I was up all night watching the news. I was totally lost."
The Financial Services Authority's director of risk conduct, Dan Waters, said that redress would have to be given to the victims, where appropriate.
"What we're saying to the advisers is: if you haven't explained properly the limits of those guarantees, then that would be a mis-sale and compensation will be paid," he added.
More than 5,600 investors were sold the Lehman-backed plans, often by financial advisers working on commission. Now the FSA has indicated that a large proportion of them could qualify for compensation.
NDFA, DRL and another provider, Arc Capital and Income, have been placed in administration, weighed down by the wait of claims against them. So investors will hope to get their money back from the Financial Services Compensation Scheme or FSCS.
The administrators of the three companies have promised to contact investors to map out what they should do.
Other victims seeking redress will have to make a complaint against the investment firm which promoted the product or the financial adviser who sold it. If they don't get anywhere, they can refer their cases up to the Financial Ombudsman Service.
The FSA has put detailed advice on its website:
It has stopped short of promising blanket compensation, saying that some investors may have been treated fairly and had all the risk fully explained.