Legal & General’s $2m endowment fine cut

A tribunal is to cut Legal & General’s £1.1m ($2m) fine for mis-selling but upheld a Financial Services Authority ruling that the insurer mis-sold endowments.

The Financial Services and Markets Tribunal, which reviewed L&G’s appeal, said L&G was guilty of mis-selling.

However, the tribunal did not agree with the FSA about the extent of the firms’ mis-selling.

As a result, the tribunal said that the fine should be cut and it would decide at a later date by how much.

The FSA fine related to Legal & General’s sale of endowments between 1997 and 1999.

The FSA found that Legal & General had failed to fully inform some customers of the full risks of investing in endowments.

In response, Legal & General said it had “proper and reasonable sales and compliance procedures in place,” and appealed to the tribunal, which has the power to overturn the FSA’s decision.

This is the first time a major bank or insurer has taken the City regulator to the tribunal.

The insurer alleged during its submission to the tribunal that the FSA investigation had been unfair.

The tribunal concluded that mis-selling had taken place but in far fewer cases than had been presumed by the FSA investigators.

As a result, the tribunal said that the fine imposed on Legal & General should be reduced.

A Legal & General spokesman said they were pleased with the tribunal’s ruling.

“We think this is more than honours even…it has been shown that the FSA’s procedures were wrong as was its presumption of widespread mis-selling.”

However, 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.

Which?, formerly the Consumers’ Association, said both sides should learn lessons from the tribunal ruling.

“While the tribunal recognised that the FSA made errors in its approach, it also proved there had been a legitimate case to be answered, and it’s right that Legal & General wasn’t exonerated,” Mick McAteer, Which? principle policy adviser, said.