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Advisers with clients invested in life settlement fund EEA have branded the Financial Services Authority’s (FSA) rhetoric on traded life policy investments (TPLIs) “reckless” after the fund was forced to close.
EEA yesterday suspended dealing in their £600m Life Settlements fund, due to "unprecedented" levels of redemption requests, after the regulator announced on Monday it would seek to ban TLPIs.
Advisers fear other TLPIs will be suspended in the coming days.
Geoff Hartnell [pictured], an IFA at Vintage Financial, said the FSA had been "reckless" in its use of evocative language like "toxic" and "death bonds" in its consultation on the ban.
"I thought I was reading a copy of the Sunday Sport rather than the regulator's home page," Hartnell said.
It was the "panic redemptions" which followed the FSA's statement that ultimately led to the demise of the EEA fund, he added - not the policies themselves.
"We had concerns about the regulation, never the fund.
"Every client we have had in the EEA fund has made 9% every year. Unlike Keydata, investors had to be sophisticated and high net worth.
James Davison, an adviser at IFG Financial Services, which has client money in EEA, said there is a real danger other TLPIs would be suspended in the next few days, pulling even more advisers into trouble.
Davison said that whilst IFG's exposure to the fund was "limited", IFAs now face the same problems caused by the collapse of the property market in 2006.
A spokesperson for EEA said the board intended to write to shareholders in the near future to provide further information.
The suspension of dealings "will in no way affect the ability of the fund to pay premiums on insurance policies in the usual manner," he added.
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| Comment | EEA advisers hit out at ‘reckless’ FSA ruling on life settlements |
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Absolutely furious!!
The FSA has looked back at Keydata and decided TLPIs are problematic. Its statement contradicts itself when stating that TLPIs should not reach retail investors yet also sayd they are unsuitable for most investors. It therefore must be suitable for some! The FSA has clearly not looked at the underlying statitics re policies in the fund where the actual time in existence from purchase is way short of the projected life expectancy and here I talk of the EEA fund. I am absolutely livid that the fund is now temporarily closed when it is one of the most transparent funds re available background information we use. How on earth can the FSA talk about promised yields re the EEA fund when it is an open ended fund with no yield promise. I feel that the FSA has left in without considering all of the underlying facts and fund background. All of my clients have been more than happy with the fund - who would not be with returns in excess of 9% per annum since inception. Just because large institutions mass marketed Keydata plans and wrongly so does not mean that other IFAs cannot act responsibly when dealing with TLPIs.
Posted by: John
Who are these people at the FSA
The FSA strikes again. Another golden goose gets killed. MD of the FSA Margaret Cole has not done her homework properly if she cannot differentiate between EEA LST and others. Does she lack the intellectual capacity to understand? Has she bothered to do her own homework properly? if these are the cases, then she is not doing her job properly. What is even more surprising is the swathes of IFAs pulling their client moneys out? could the same be said of them as Margaret Cole? What is increasingly sickening is the un-touchable position these high-handed and arrogant dispensers of doom wield over the industry. It makes yu want to weep
Posted by: Justin Thomas
Here is a right weeze
If every single IFA and Product Provider and Lender and LLp and Sole Trader turned around and said WE WILL NOT BE AUTHORISED ANY MORE. Where would the country and the FSA be?? No where - no authority, no credibility. We would win. Why don't we do it? No Gonads thats the answer.
Posted by: Darren
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No doubt if a client want to redeem and is unable and then complains, the FOS will find in favour of the client and make the adviser pay redress to the tune of the investment regardless of the quality of the fund and the advice/client classification. I am aware this is what has happenned in the case of other Life Settlement funds (Assured, Centurion)..
Posted by: justin