Member Update 31st January 2020
Written by Charlie Palmer on 31/01/2020

Question

What is the par value of a gilt?

a) The amount guaranteed to be repaid at redemption

b) The rate of interest payable on the gilt

c) A stated rate of interest each year

d) The value of an index-linked gilt

The answer is A.

Liability for introducers and sales staff

Allianz is suing a clothing company for £27m (US$35m) for allegedly being negligent in selling payment protection cover and ducking out of compensating customers who brought claims for wrongful selling over policies underwritten by the insurer.

JD Williams & Co Ltd, which sells clothing and homewares, breached its duty to exercise reasonable skill when offering payment protection insurance with store credit between 1985 and 2005, Allianz Insurance PLC said. The retailer also negligently sold product protection insurance and life and death cover on behalf of Allianz to its customers, which later created an influx of claims for misselling, according to the suit.

Allianz had to pay out a total of £27m in redress for the retailer's customers when the Financial Ombudsman Service ruled that they were wrongly sold the insurance products—a practice that later erupted into scandal—according to the particulars of the claim at the High Court in London, which was recently made public.

‘It was JDW, rather than Allianz, that had conducted the sales of the insurance products,’ the insurer said in its suit, filed on 7 January 2020. ‘It was only JDW, rather than Allianz, that held the necessary information required in order to assess whether the insurance products had been missold … [and] that had received and retained the vast majority of the financial benefit from the sales of the Insurance products.’

The cover, payment protection insurance (PPI), was designed to cover loan repayments when policyholders became unable to pay. But banks and loan providers improperly sold millions of policies to customers who did not want or need the cover and might not have qualified to make a claim. Lenders have paid more than £50bn in compensation in Britain's costliest retail financial scandal.

Allianz said that each customer would pay insurance premiums to JD Williams, which retained 55%–81% as commission. The company then gave the remaining amount to Allianz, which was around 3% after all other costs were paid, according to the claim.

The ombudsman service decided in 2013 that it did not have jurisdiction over JD Williams and assigned Allianz responsibility for responding to complaints. 

The insurer is looking to recover the redress it paid out to JD Williams' customers.

This is a case of the broker-provider suing the introducer-seller, and while common at an individual level, is very unusual at this level.  If firms use IFACs standard RI agreements, they will not have trouble collecting the money for reckless misselling from the RI, who ultimately should, and normally does, remain liable for their advice. 


Business plans

IFAC’s model business plan has formerly been geared towards IFA etc 

We have now prepared an example for VOP for Equity release and or Mortgage etc

Saved on BAT in document library, and available here


 Tilney refused permission to take over smith and Williamson – discussion ongoing

Announced in September last year, the transaction was expected to complete in early 2020, subject to regulatory approvals.

Smith & Williamson shareholders were to receive £625m, through a combination of cash and shares, while Smith & Williamson management shareholders would roll the majority of their investment into the equity of the enlarged group.  However, it has now emerged that plans have stalled. 

In a joint statement, Smith & Williamson and Tilney said: ‘As part of the regulatory process to approve the transaction, the FCA has raised a number of issues with the proposed transaction as currently structured.

‘As a result, Tilney is engaging with the FCA to seek to address its concerns and understand what requirements need to be met for a new application that are consistent with the strategic rationale and investment case.

The merged business, to be named Tilney Smith & Williamson, would have over £45bn of assets under management and retain the accounting division, handling tax, audit, accounting and business advisory services.

A total refusal by FCA would damage both firm’s reputation.

The FCA permissions process is endlessly tightening up, and making work slower and harder. 

But the good news is that the individual IFAs no longer need CF30 approval.

SMCR the best thing since Brexit

SMCR is the best thing to happen to financial services in many years.

It is classic de-regulation, dressed up as an increase in regulation.

At a sweep, some directors no longer need to get FCA approval to be authorized., and neither do IFAs working as RI’s.  

Non executive directors don’t have a Senior manager role, and neither do IFAs.

So the Form A process that we have all grown to love, and which is currently on its twentieth version in as many years, is now not used for the vast majority of appointments in the IFA world.

Now that is what I call progress.

Don’t be fooled or lured into a false sense of security, because this will push the onus onto you the senior manager to ensure that the appointment is correct and is correctly made (ie take up references, and use job specs and interview properly). But my sense of the IFA world is that most firms are trying to do the right thing, and now they can continue to try, without having the bureaucratic sprinkler of a rubber stamp at FCA.


Transact link.

Click here to get access from Transact into your customer portfolios on BAT.


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