16 April '03 - Letter from John Tiner FSA to Alex Henney

Thank you for your further letter of 27 March enclosing a copy of the paper you have submitted to Lord Penrose as further evidence in his Inquiry.

I do not propose to comment on the paper itself - it represents your view of the historical background with which you will not be surprised to know we do not necessarily agree. I do however feel I need to respond - at least in general terms - to some of the issues that you raise in your covering letter. There are two clear themes that emerge in particular: access to information and governance.

First, you claim that Equitable Life has denied you access to the information that you consider you need, and you therefore criticise the FSA for its failure to compel Equitable Life to provide that information to you. We have made it perfectly plain that we encourage firms to provide clear information to policyholders and are in the process of reviewing the information that we require, to see if further improvements can be made. However, that is a forward looking exercise, and in any event is unlikely to cover some of the matters that you have raised in your correspondence over the last few months.

You are, of course, correct that the FSA has wide ranging powers to require firms to comply with regulatory requirements, and to impose such other requirements as we consider necessary to deliver our statutory objectives, including consumer protection and public awareness. However, we must ensure that the use of our powers is proportionate, efficient and reasonable taking into account the circumstances of the case. Accordingly, we must take into account a range of factors. In relation to the issues you have raised, relevant factors include the benefit to policyholders of having the information, the ability of the firm to provide it and the cost of doing so (particularly when those costs will be borne by the policyholders). You imply throughout that Equitable Life has fallen way short of industry standards in the information that it provides to its policyholders, though we can see no evidence to support that view.

Your other main issue is about the governance of Equitable Life. As we have explained repeatedly, any company must act in accordance with the requirements imposed under the Companies Acts, and in the case of financial services firms, FSA rules. Beyond that, it is for the members - in this case the with-profits policyholders - to decide on what they want their company to do. The basis of your argument is that there is something inherently flawed in the constitution of Equitable Life. I think this is a matter for the members and, in any case, we have seen no convincing evidence of that.