Extent to which financial services compensation scheme can pursue claims assigned to it by investors whom it has compensated

Published date20 February 2009
Pages70-75
Date20 February 2009
DOIhttps://doi.org/10.1108/13581980910934054
AuthorJoanna Gray
Subject MatterAccounting & finance
LEGAL COMMENTARY
Extent to which financial services
compensation scheme can pursue
claims assigned to it by investors
whom it has compensated
Joanna Gray
University of Newcastle upon Tyne, Newcastle upon Tyne, UK
Abstract
Purpose – The paper’s aim is to report and comment on two preliminary issues that arose from
claims being pursued by the Financial Services Compensation Scheme (FSCS) against Abbey National
Treasury Services (ANTS) and NDF Administration Ltd (NDF).
Design/methodology/approach – The paper outlines the facts and explains the decision.
Findings – The FSCS commenced action against ANTS as assignee of the assigned claims and
alleged that ANTS had collaborated with NDF in product development and promotion of the
Structured Capital at Risk Products and was liable in negligence and misrepresentation to the
investors whose claims it held as assignee. Having considered the arguments, the Judge concluded that
FSA did have power to make rules enabling FSCS to take assignment of investor claims.
Originality/value – The issues in this case go to the heart of the funding mechanism of the FSCS.
The financing of such compensation schemes is a perennially controversial issue in every jurisdiction
that has them.
Keywords Legal decisions,Compensation, Financial services
Paper type Viewpoint
Financial Services Compensation Scheme Ltd v. Abbey National Treasury Services plc:
High Court Chancery Division: Mr Justice David Richards.
Date of Judgment: 31 July 2008.
Facts
This was a trial of two preliminary issues only that themselves arose from claims
being pursued by the Financial Services Compensation Scheme (FSCS) against Abbey
National Treasury Services (ANTS) and NDF Administration Ltd (NDF). Those claims
had in turn been assigned to FSCS by some 1,800 individual retail investors who had
received compensation from FSCS in respect of mis-selling claims against Independent
Financial Advisers (IFAS) which were unlikely to be met by the IFAS concerned.
The factual background to those original claims against the IFAS was briefly
described by the Judge as follows before he set out the preliminary issues:
The products in issue involved a lump sum investment which linked the return on maturity,
by a pre-set formula, to the performance of a specified equity index. The return would be
greater or less than the initial investment depending on the performance of the index, but it
was geared in the case of most of the products, so that there might be a reduction of 2 per cent
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1358-1988.htm
JFRC
17,1
70
Journal of Financial Regulation and
Compliance
Vol. 17 No. 1, 2009
pp. 70-75
qEmerald Group Publishing Limited
1358-1988
DOI 10.1108/13581980910934054

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