InvestmentsSep 25 2014

Life settlements firm EEA addresses FCA ‘mis-selling’ claim

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Life settlements group EEA has responded to the FCA’s announcement by saying it had never provided advice to retail investors and had only marketed its fund to institutional clients and independent financial advisers.

It added if there had been instances where products had been mis-sold by an adviser, “then it may well be appropriate for an investor to consider making a claim against the IFA in the manner suggested by the FCA.”

The FCA once again targeted the asset class after earlier this week it told financial advisers who invested clients in the EEA Life Settlements fund to review their cases for possible mis-selling as it warned that redress may be due. The previous regulator, the FSA, had branded the asset class “toxic”.

In an alert on traded life policy investments published earlier this week, the FCA told those firms that advised clients to invest in the EEA fund to re-examine their sales to ensure they followed the earlier guidance and if they had not yet acted on it, the FCA suggested they should do so now.

The regulator is concerned as TLPIs are “usually” marketed as offering strong returns that are unrelated to stock market performance, “which makes them appear attractive at a time when more traditional investments are not doing well”.

However, TLPIs are high-risk investments, the regulator said, stating that they use complex investment strategies based on calculations about how long people will live.

Elsewhere, the management of the EEA fund said it was distributing $14.6m (£8.9m) to investors in its ‘run-off’ shares, established after its recent restructure.

It added the net value of the fund’s policies at the end of August was $861.8m, including cash and $148.7m of proceeds from maturities.

The company also said as at June 30, assuming the policies matured when they were expected to, the management expected 46.9 per cent of the death benefit to be collected over the next two years, 58.19 per cent in three years and 72.79 per cent in five years.