As an editor of a news publication, especially in the ultra-responsive age of online journalism, one is often required to make a snap decision.
More often than not a combination of experience and gut instinct will lead you to the correct call: write the piece, don’t write the piece, disregard the previous plans for the afternoon and throw every reporter we have at a breaking story. That sort of thing.
And obviously, inevitably, sometimes you get it wrong. The story you pass over goes ‘viral’ (often the unseemly connotation is apposite) and you’re left picking up the pieces.
That’s what might have happened with the news that an action group of investors in the suspended EEA Life Settlements fund are set to sue the regulator for £60m, hoping to circumvent the regulator’s statutory immunity by going to the European Court of Human Rights.
When the first statement to the press landed in my inbox in January, I immediately decided not to give it the time of day. “Class action” against the financial regulator? The term has no basis in English law and the case is not credible, I asserted when questioned.
So we left it, our peers picked it up and by all accounts many of the advisers we share as an audience have lapped it up, leaving all manner of supportive vituperative in the comment threads about the FCA getting its comeuppance and so forth.
“Class action” against the financial regulator? The term has no basis in English law and the case is not credibleThe follow-ups, well, followed - and still I could see no value in it. ‘Click-bait’ if ever I saw it: generating traffic while adding nothing to the sum of human knowledge.
Eventually, this week, our sister title Financial Adviser relented and a basic story covering the claim has appeared on FTAdviser. You can read it here.
I will concede the existence of the claim is probably, grudgingly, newsworthy. Our parent paper took the same view and has published a single piece. But that doesn’t diminish the fact it is utterly risible codswallop - and every one of you, dear readers, should be opposing the attempt.
The issue at hand is whether the FCA was, to use the term used by EEA itself, “reckless” when it issued a strongly worded warning over life settlements investments in 2011 that revealed it was consulting on a ban to retail investors and referred to the investments as potentially “toxic”.
For the record: the FCA has consistently defended its “justified” intervention and actually did eventually follow through with the ban to retail clients in 2012. It has also told retail investors they may have eligible claims against advisers who recommended the fund.
EEA faced a wave of redemptions and was suspended in 2011, with most investors still unable to get their hands on their cash despite a number of restructuring attempts. Now 514 investors are claiming the FCA should repay their £47m plus 8 per cent interest, totalling £60m in claims.
They are writing to the watchdog and, assuming it maintains stubborn resistance, will assume it has met the criteria to exhaust all options for a national resolution and take the case to the European court. The group alleges the regulator infringed their human rights by denying access to funds.
This is a nonsense. Firstly, cards on the table: I agree with the FCA’s position on the asset class.
These funds buy up a portfolio of US citizens’ life policies in the hope that enough will die before the ongoing premiums and initial purchase price erode the potential return from the eventual payout. They are colloquially referred to as ‘death bonds’.
They are illiquid, complex and, yes, for a retail investor could I reckon be considered ‘toxic’. That the action group claims some older investors were relying on this one fund exposed exclusively to this esoteric asset class for their whole retirement income, is the best defence for the FCA intervention I’ve yet heard.
Secondly, it is not for a European court, on human rights grounds no less, to undermine the actions of a regulator in its domestic markets. The FCA has set out a consistent position on traded life policies and it should be respected.
To be honest, I’m not sure the court will even hear the claim; the arguments setting out why this is the correct forum for it in the first place are, for my money, an exercise in sophistry.
Finally, why on earth would advisers - and you may be interested to know that a cursory Google search reveals it is only publications in this sector that have covered the story, outside of that one piece in the FT - support a claim when the bill will ultimately land at your door?
Suing the regulator is not a heroic stand against despised automatons in suits, for they are not liable and the organisation has no shadowy benefactors. No, if successful it would be the firms that ultimately fund the FCA, including every adviser firm, that would lose out.
Good thing it hasn’t got a cat’s chance in hell, then.
ashley.wassall@ft.com
