News - Structured products
Categories: Structured Products
Topics: Lehman brothers | Fscs | Fsa
Home secretary Theresa May has written to the Financial Services Compensation Scheme about its decision to compensate some Lehman-backed NDFA structured products but not others.
Billions of dollars of the US investment bank's debt were packaged as structured products and sold to retail savers worldwide. When Lehmans collapsed in September 2008, the investments became worthless.
About 2,000 investors in 'Capital at Risk' plans run by failed firms Arc, NDF Administration and Defined Returns Limited (DRL) have been told by the FSCS that they are not eligible to claim compensation for their losses.
The son of one Capital at Risk investor, who is 93 years old and invested £50,000 without the advice of an IFA, who lives in May's constituency, has met with the home secretary to argue the decision is unfair.
In a letter to him this month, on the third anniversary of Lehman's collapse, she expressed "sympathy" for investors, and said she had raised the issue with the FSCS.
"I have sympathy for anyone who lost investments through the events associated with NDFA and Lehman Brothers," she wrote.
"I appreciate the concerns of those who feel they have been unfairly treated due to the decision by the FSCS not to compensate investors of certain plans, whilst compensating others in similar plans. This is an issue I have raised with the FSCS."
However she added that the FSCS is an independent non-governmental body, governed by rules set by the FSA, not parliament.
The FSCS has said it is satisfied the relevant marketing materials for the Capital at Risk products provided adequate and appropriate warnings that there was a risk to investors' capital if the undisclosed organisation backing these investment products, Lehmans, failed.
However it said it will offer payouts to the 1,700 investors in the 'Capital Secure' products backed by the collapsed firms.
Investors argued the marketing material for both plans are identical apart form the name of the product, and branded the decision unfair.
Categories: Structured Products
Topics: Lehman brothers | Fscs | Fsa
Comments
Investors and some MP's bewilderd by FSCS
A substantial number of MP's including several ministers cannot understand the FSCS announcement/decision - especially after reading the Plans. FSCS, in rejecting claims, ignores all evidence put before it which it doesn't understand or doesn't like. How can anyone differentiate between identically worded, but slightly differently titled Plans? The underlying risk was buried in the small print, unlike the reasurring and misleading bold highlights. As the Learned Judge, the Hon. Judge Lewis Kaplan stated in UBS, "a misleading statement cdisplayed prominently and in numerous places may not be cured by inconspicuous and scattered warnings".
Who, in their right mind would have knowingly invested in Lehmans when its share price was falling like a stone amidst an avalanche of continuous adverse expert financial and media reports?
FSCS cites the advice of its counsel that there were adequate warnings.It's Regulator FSA says the Plans were mis sold and failed the 'clear, fair and not misleading test'. Another Leading Counsel, who is directly involved in the matter advised in his Opinion, that all Plans were missold. But FSCS listens to no one but itself. Its time it was subjected to an independant external adjudicator like most other similar organsations.
Posted by: Pursuer
15 Sep 2011 | 13:54
Fscs Incomprehensible decisions
The Fscs initially claimed that only capital secure plan were eligible for compensation and the capital at risk plans were not ,despite the fact that a lot of the brochures were near identical in risk factors and layout. They paid out on all the CS plans and told the rest of us to prove a legal liability to them. Many forms went in with arguments that raised genuine legal liability and were dismissed without proper debate . The FSCS apear to be Judge,Jury and executioner,accountable to no one but themselves. The odd thing is that they now have paid out compensation to a small number of CAR plan holders that present a good argument. Surely by the act of compensating CAR plans FSCS have acknowledged a legal liability for the plans. Where is the logic!where is the justice?
Posted by: mosvleug
15 Sep 2011 | 21:07
covering tracks
FSCS seemed to make a simplistic and ill-informed distinction between 'capital at risk' and 'capital secure' products in 2009/10 and has been trying to cover its tracks ever since. Having announced last year that they did not see grounds for compensating 'capital at risk' plan holders, they have since been doing exactly the opposite with certain of these plans.
Posted by: investor
15 Sep 2011 | 22:54
Hypocracy?
Is it not strange that FSCS rejects complaints that are totally compatible with the FSA review of SCARPS, that the Plans marketed by NDFA,DRL & Arc failed the test that they must be 'fair, clear and not misleading'? Even more strange when FSCS sued Abbey National, complaining that the Plans marketed as Precipice Bonds were not fair,clear and not misleading- and by the way those were marketed by NDFA as well. Same goods, differnt lables, same complaints. Oh and by the way FSA is FSCS's Regulator, but obviously FSCS doesn't care what its Regulator thinks.
Posted by: Observer
19 Sep 2011 | 18:28
Hypocracy?
Is it not strange that FSCS rejects complaints that are totally compatible with the FSA review of SCARPS, that the Plans marketed by NDFA,DRL & Arc failed the test that they must be 'fair, clear and not misleading'? Even more strange when FSCS sued Abbey National, complaining that the Plans marketed as Precipice Bonds were not fair,clear and not misleading- and by the way those were marketed by NDFA as well. Same goods, differnt lables, same complaints. Oh and by the way FSA is FSCS's Regulator, but obviously FSCS doesn't care what its Regulator thinks.
Posted by: Observer
19 Sep 2011 | 18:29
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03 Nov 2011 | 00:33
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Posted by: zetfqc
05 Nov 2011 | 11:26
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There are 5 "Capital risk plans", which were backed by Lehmans, and the marketing company is in administration.
A number of victims, who presented suitable forms, have managed to get compensation.
www.missoldinvestments.co.uk
Posted by: Yorkboy
15 Sep 2011 | 12:15
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