MPs Criticise FSA Orphan Cash Position

MPs Criticise FSA Orphan Cash Position

The Treasury Select Committee (TSC) has slammed the FSA for failing to develop clear principles for the regulation of inherited estates.  Inherited estates are unclaimed or unpaid assets within insurance companies, banks and building societies.  

The group of MPs also slammed Prudential for using £1.6bn of its inherited estate to pay mis-selling costs.  In its report, the TSC says shareholders’ control of fund strategy means they stand to gain from certain uses of inherited estates at the expense of policyholders.  The report says the charging of mis-selling compensation costs to inherited estates is inappropriate and claims that the vast bulk of mis-selling costs should be borne by shareholders.  

Our view

Tough call here as it was those same mis-sold policies that actually contributed to the economies of scale of the investment funds and assisting in getting them to grow and be marketed.  Although, we have to say there is something unethical here were an insurance company can use policyholder monies to fund compensation.

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