As reported, the Action Group for Life Settlement Fund Investors is arguing the FSA effectively caused a run on one of the biggest funds within the traded life policy sector by describing the products as “toxic” among other things. Having appointed the regulator, the action group argues the UK Government has ultimate responsibility for the FSA.
This is not the first time we have seen action by investors in funds which have come unstuck, nor is there anything particularly surprising about investors grouping together when they feel wronged.
However, a more recent phenomenon seems to be the focus on the role played by the regulator, which, in the case of traded life policies, it is argued gave “tacit complicity” in their sale.
Goading the governments?
Another example of action being taken by investors, or in this case advisers taking action against a regulator, is the LM Investment Management (LMIM) debacle. A group set up by advisers to help clients claw back some cash called the Adviser Committee for Investors (ACI), has publically questioned the role of the Australian Securities & Investments Commission (ASIC) who regulated LMIM.
The ACI make the case that, aside from anything else, the Australian regulator should have at least sought to protect the reputation of the country’s financial services industry by ensuring funds being exported to investors around the world were properly constructed.
It should be noted that the circumstances of the two groups are very different – LMIM ran a serious of funds which failed (with no help from the Australian government). In contrast, there is no evidence to suggest the major traded life policy fund, EEA Life Settlements Fund, would have failed.
It is arguable that both the ACI and the more recent Action Group for Life Settlement Fund Investors make a good case.
However, campaigns like these require a huge amount of effort in order to succeed. Indeed, it took national newspaper exposure and even the Prime Minister David Cameron stepping in before the government took any direct action in the well documented Arch Cru case.
There is another side to the coin here too. There are some, indeed many, corners of the financial services industry which believe the last few years have seen enough new regulation. Perhaps campaigns such as those mentioned act counter to this and in fact encourage, or even goad governments, to clamp down further?
The answer then isn’t easy. Good luck to those action groups which are trying and let’s hope we don’t need any more in the near future…
Follow me on Twitter @SimonDanaher1
