TTF Blog: 14 September 2020

Lawmakers increase scrutiny on advisers & watchdogs

Offshore island - Jersey -- pic by Florian Pépellin

by Alex Varley-Winter, TTF’s Head of Media Relations & Investigative Reporting

 “I have long been concerned about the approaches of offshore advisers and I believe that this should be the particular focus …” commented Bob Blackman last week, as he was appointed to chair our All-Party Parliamentary Group on Pension Scams.  Rob Roberts, Lord Kirkhope and Nick Smith will vice-chair, supported by a voluntary Secretariat – get in touch if you’d like to help.

This week, TTF’s founder Andy Agathangelou is looking forward to delivering our evidence to MPs’ newly-opened Pension Scams Inquiry – which we campaigned for – he’ll be on Parliament TV at 9am this Wednesday. We have interviewed six pension scam victims in addition to drawing on the wealth of knowledge that Andy has gleaned about this problem over the years, leading him to conclude that scams are a ‘festering sore’ on the pensions industry.

The tip of an iceberg

The Work and Pensions Committee’s inquiry – which will focus on ‘pension freedoms’ legislation – can only skim the surface of the UK’s vulnerability to fraud in general terms. In 2020, this category of crime is booming. MPs, police, banks and City watchdogs have been under fire for failing to get to grips with it and although bank branch staff stopped £19m cons in the first half of 2020, the scams keep coming.

In the period we’ve spent preparing our evidence to the inquiry, I’ve been concerned to see that fraud – in all categories – has soared to extraordinary levels. Action Fraud’s interactive dashboard shows that alleged fraud victims’ reported losses in July edged towards half a £billion — £418.6M in that month alone from 37,414 incidents, in the middle of the UK’s coronavirus response, with an increasingly financially insecure population in lockdown. The Daily Mail drew on these figures to describe fraud as having tripled.

Bank of England, pic by MrsEllacott
Stride intervenes in watchdogs’ complaints controversy

Chair of the Treasury Select Committee Mel Stride has effectively slowed down a controversial consultation by City regulators that would ostensibly cap compensation to victims of regulatory failure at £10,000, and potentially allow the watchdogs to write off complaints they deem ‘vexatious’.

Andrew Bailey and Chris Woolard have just extended the consultation period until 12th October, in response to Mr Stride’s intervention below, in which he says that the results will be of interest to the Treasury Select Committee.

The delay is unlikely to be the end of regulators’ troubles. The planned complaints scheme has been both heavily critiqued by the Financial Regulators Complaints Commissioner and by victims of financial abuse who have complained about the FCA in the past. There are also serious questions being raised – to me – over which consumer stakeholders were told about the planned changes to the scheme, given that Mr Bailey and Mr Woolard report ‘proactive’ outreach to consumer organisations in their joint reply to Mel Stride. We have not yet heard from these or any user of the existing complaints scheme who was approached for their views.

It is TTF’s considered view that the plan for a new complaints scheme ought not to be delayed, but actually suspended, pending the results of three reviews into major scandals about which regulatory failure was alleged: London Capital & Finance, the Connaught Income Fund Series 1, and the sale of Interest Rate Swaps to SMEs.

We continue to plan our response to the consultation, if you would like to contribute, please get in touch.

Mel Stride's letter to the FCA last Friday, which has resulted in the consultation being extended to October 12th

Will 'lone ranger' lawyer's achievements inspire UK savers?

UK Supreme Court; pic by Dietmar Rabich

Award-winning journalist Robin Powell wrote after attending TTF’s Masterclass with Jerry Schlichter last week: “I have little doubt that we will see legal action against UK fund trustees and asset managers over excessive fees in company pension schemes within the next few years. It really shouldn’t be necessary to resort to litigation to protect the interests of pension fund members. But, in the US, that’s what it took to open people’s eyes to the abuses taking place.”

The New York Times dubbed lawyer Jerry Schlichter the ‘lone ranger’ on his case against Lockheed Martin in 2014. Gretchen Mortenson wrote that ‘for years, Mr. Schlichter said, Lockheed officials allowed State Street to receive large and hidden fees from plan investments in addition to an annual record-keeping fee of $4 million to $8 million. Plan participants, he contends, lost hundreds of millions of dollars as a result.’ His law firm Schlichter Bogard & Denton later achieved a $62 million settlement on behalf of Lockheed Martin employees in that case.

Risking personal ruin to wake up sleeping giants

Mr Schlichter’s personal story is extraordinary. He was working as a no-win-no-fee personal injury lawyer when, in the mid-00’s, he came to the realisation that there were buried issues of excessive fees in some very large 401(k) pension schemes, with stewards asleep at the wheel.

“I made the very sobering decision to take on the biggest companies in the country. Boeing , Lockheed Martin, Kraft Foods, and so on,” he recalls.

Mr Schlichter’s law firm was then, basically, three people. “We could not begin to finance this out of our own resources, we would have to get an eight figure line of credit, so we put our houses, our net worth, everything on the line, because without that we would not be able to fight.”

Regulators, and what he calls ‘conservative’ judges, could not necessarily see the problem when Schlichter Bogard & Denton started bringing cases. If they had lost the first case, it “would have been personally a disaster resulting in bankruptcy”, and would have set a damaging precedent discouraging others.

Other lawyers had been aware of the excessive fees in many 401(k) plans, but nobody else had taken it on ‘because of that staggering risk’, he recalls.

His firm persevered: “We filed in 2006 a series of cases against these very large companies, all of which had $billion or multi-$billion plans.”

He gave us an account of how one opponent lavished more than £40M on trying to beat them – in a case he won – and how he faced some hair-raising set-backs in the early days, with one client facing the threat of financial ruin themselves. As experienced ‘no win no fee’ lawyers in the purest sense, his firm had taken a very considered risk, starting before the 2008 recession when credit was, perhaps, more easily available.

I recommend browsing this analysis of what he has since achieved in the United States, in terms of forcing the cause of fee transparency, as it was unprecedented.

Press Timeline of relevant articles:

11 Sep 2020 – ‘Delay changes to Watchdog Complaints Scheme’ by James Hurley for The Times
 
 
03 Sep 2020Regulators have not yet got to grips with how to close down crooks, warns TTF  by Hope William-Smith for Professional Pensions
 

24 Aug 2020Financial Conduct Authority rushes to minimise compensation for its failings by James Hurley for The Times

04 Aug 2020Have your say: Will the WPC’s inquiry into the impact of pension freedoms be too overshadowed by Covid-19 impacts? by Professional Pensions

03 Aug 2020 – ‘“I’m 39, have lost my job and am in debt – can I unlock my £18k pension?” … DON’T do it!’‘ by Steve Webb for This is Money

01 Aug 2020‘I lost £2.3m after I was conned into transferring my pension’ by Jessica Beard for the Telegraph

31 Jul 2020 ‘Common sense’ prevails as pension freedom withdrawals fall 17% — But drop is expected to be ‘a short-term blip’ by Robbie Lawther for International Adviser

31 Jul 2020HMRC figures show plunging pension freedom withdrawals by Hope William-Smith for Professional Adviser

28 Jul 2020MPs launch inquiry into pension scams  by Tom Kelly for Daily MailUK Pension Scams Under Scrutiny After 2015 Relaxation in Rules by Reuters & MPs launch wide-ranging pension scams probe by Justin Cash for MoneyMarketing

24 Jul 2020 – US business groups seek steps to stamp out online fraud by Leonie Barrie for Just Style

22 Jul 2020Pension scams increase amid lockdown by Sophie Smith for Pensions Age & Missed Opportunity to Use Victims in Scam Work by Amy Austin for FT Adviser

20 Jul 2020 Campaigners Aim to Create Pension Scam Database by Michael Klimes & Government eyes unauthorised firms by Justin Cash for MoneyMarketing

17 Jul 2020 – Year ‘dominated’ by FCA shortcomings as 205 complaints made,  by Rachel Mortimer for FT Adviser

29 Jun 2020 – MPs Pushed to Launch Pension Scam Inquiry by Amy Austin for FT Adviser & Lawmakers Urged To Open Inquiry Into Pension Scams by Martin Croucher for Law 360

11 May 2020 – FCA urged to build public trust in independent reviews by Rachel Mortimer for FT Adviser

15 Apr 2020 – Met police lose two thirds of finance officers as fraud soars by Ben Ellery for the Times

20 Mar 2020 – Connaught review delayed as Covid-19 concerns loom by Rachel Mortimer in FT Adviser

29 Dec 2019‘Lambs to the slaughter – tens of thousands of savers have lost up to £10billion in rogue pensions schemes sanctioned by the government… and now the taxman is threatening VICTIMS with fines’, by Tom Kelly for the Daily Mail

15 Aug 2019Victims hit by Connaught’s collapse blast City watchdog for ‘whitewashing’ independent review by Lucy White for Daily Mail

18 Jun 2019“I came home to find my house had been stolen!” by Angela Ellis-Jones for the Daily Mail

20 Jun 2019 – FCA orders review of its handling of Connaught collapse by Rachel Mortimer for FT Adviser

Further information about the TTF

You can click on the button below to read about the 130+ Transparency Task Force Ambassadors. The list includes world class academics and highly respected thought leaders from right around the world.

Click here to see the TTF Ambassadors

Transparency Task Force Advisory Board

You can click on the button below to read about the Transparency Task Force Advisory Board, which is Chaired by the former Chair of the Financial Conduct Authority’s Financial Services Consumer Panel.

Click here to see the TTF Advisory Board

If you want to read testimonials…

If you haven’t been to one of our events before you can use the link below to read some testimonials:

Click here for Testimonials

Scroll Up
Social Share Buttons and Icons powered by Ultimatelysocial
Twitter
YouTube
YouTube
LinkedIn