Legal & General claims victory in battle with FSA

Legal & General (L&G) is claiming to have scored a major victory in its high-profile case against the Financial Services Authority (FSA).

The Financial Services and Markets Tribunal today cleared L&G of wide-spread mis-selling of endowments, proving that only eight out of the 152 were mis-sold.

The Tribunal also indicated that the £1.1m fine imposed by the FSA should be reduced and said a further hearing will be held on this issue.

Herbert Smith partner Martyn Hopper, a former senior member of the FSA’s enforcement team said both parties can claim victory.

"The case proved that L&G was justified in feeling aggrieved but the FSA can claim a sufficient victory because they’ve proved mis-selling," added Hopper.

Hopper then added that the case raises questions about the FSA’s methodology in investigating the mis-selling cases and the size of the sample.

The dispute dates back to the late 1990s, when L&G was alleged to have mis-sold endowment mortgages without highlighting the risk that the investment might not repay the capital element of the loan for which it was intended.

L&G was one of several companies fined for similar offences, though this was the only one to challenge the FSA’s sanction.

L&G was advised by Freshfields Bruckhaus Deringer partner David Scott.