EEA life fund investors to take action against FCA
Investors in the EEA Life Settlements Fund are pushing for compensation from the FCA after reaching £60m in claims, Peter Lihou, founder of the EEA Life Settlements Action Group, has said.
The fund purchased life policies in the US from terminally ill people who would, according to Mr Lihou, have otherwise received a derisory settlement from their insurers. The group reached the amount after 514 claimants signed up. Claimants had invested a total of £47m with interest of 8 per cent over three and a half years, taking the total value to £60m.
In 2011, the FSA suspended the fund claiming they were “high-risk, toxic” products similar to Ponzi schemes. Mr Lihou said the regulator’s statements were “factually incorrect” and had caused a run on the funds. He argued that the regulator infringed human rights law by denying investors access to their funds.
Mr Lihou said: “People were devastated by the decision to suspend the fund. For many it was their only source of income. We are looking for compensation for the hardship people suffered, and will bring actions in the courts to ensure they are compensated for their loss of capital and income.”
He said the group will now send a formal letter to the FCA but, if a settlement is not reached, the group would take their case to the European Court of Human Rights.
Mr Lihou said: “In 2008 I had lost money with Bradford & Bingley, and told my adviser that I wanted to invest in something safe and ethical.”
His adviser showed him the case study of a woman in the US who would have received a small payout from her insurance company, but EEA gave her a far better amount, allowing her to live out the rest of her life in comfort.
Mr Lihou said he did not hold his IFA responsible, adding: “Although the FCA advised people to take it up with their advisers, the reality was that they would have been party to the same information as their clients, and there was nothing in the public domain to suggest they considered it to be toxic or high risk.”
Right to Reply
An FCA spokesman said: “The FCA remains of the view that our intervention in this market was justified. The FSA issued the guidance for consultation to address urgent concerns about the growing risk of consumer detriment posed by the traded life policy investments market.”
Adviser view
Justin King, financial planner at Dorset-based MFP Wealth Management, said: “For the small IFA, the first port of call is to do due diligence. How do you do this with a life settlement fund? If I offer a client the Vanguard FTSE Tracker, while I haven’t gone down to check they have all the funds in the fund, you know it does what it says on the tin, and have gone through all the hoops and checks. If you really understand the product and have done thorough due diligence and analysis, then great, but is there not enough risk in equities?”
