Determinations of maladministration
Jump to
6.1 In section 5, I set out the ten findings I have made that the acts or omissions of the prudential regulators and/or GAD fell short of the standard that could reasonably be expected of them.
6.2 Having done so, I then go on to assess whether those acts or omissions were so unreasonable, or fell so far short of acceptable standards of good administration, as to constitute maladministration. The assessments that I have made on these questions are set out in Chapter 11 of Part 1 of my report.
6.3 I have made ten determinations of maladministration – one against the DTI, four against GAD, and five against the FSA. I have done so because I am satisfied that the departures that each finding represent were unreasonable in the circumstances and/or fell far short of acceptable standards of good administration.
6.4 Those determinations are:
- that the failures (i) to insist, when approving the appointment in June 1991 of a new Chief Executive, that he should demit office as the Society’s Appointed Actuary, and (ii) during the period from 1 July 1991 to 31 July 1997, to consider the use of their powers to seek to remove that person from such a ‘dual role’ constitutes maladministration by the DTI;
- that the failure, as part of the scrutiny process, to question and seek to resolve questions within the Society’s regulatory returns for each year from 1990 to 1993, related to (i) the valuation rate of interest used to discount the Society’s liabilities and (ii) to the affordability and sustainability of the Society’s bonus declarations, constitutes maladministration by GAD;
- that the failures, when the introduction of the Society’s differential terminal bonus policy was identified as part of the scrutiny of the 1993 returns, (i) to inform the prudential regulators about the policy, (ii) to raise the matter with the Society, or (iii) to seek to identify what the rationale was for the introduction of the policy and how it was being communicated to policyholders, constitutes maladministration by GAD;
- that the failure, as part of the scrutiny process, to question and seek to resolve questions within the Society’s regulatory returns for each year from 1994 to 1996, related to (i) the valuation rate of interest, (ii) the affordability and sustainability of bonus declarations, (iii) apparently arbitrary changes to the assumed retirement ages, and (iv) the holding of no explicit reserves for the liabilities associated with prospective liabilities for capital gains tax, for pensions mis-selling costs, and for guaranteed annuity rates, constitutes maladministration by GAD;
- that the failures (i) to ask for the information GAD needed in respect of the Society’s 1995 returns to enable them, as part of the scrutiny process, to be sure that the Society had produced a valuation that was at least as strong as the minimum required by the applicable Regulations, and (ii) to pursue the information before them that the omitted information had led to the users of the returns misconstruing the financial strength of the Society constitutes maladministration by GAD;
- that the failures (i) to ensure that the financial reinsurance arrangement was not taken into account within the Society’s 1998 returns without an appropriate concession being given, and (ii) to ensure that the credit taken by the Society within its returns for 1998, 1999, and 2000 properly reflected the economic substance of that arrangement constitutes maladministration by the FSA;
- that the failure to pursue the issue of the proper disclosure, within the Society’s regulatory returns for 1998 and 1999, of the potential impact on the Society of it losing the Hyman litigation constitutes maladministration by the FSA;
- that the failure to record their decision to permit the Society to remain open to new business, following its loss of the Hyman litigation constitutes maladministration by the FSA;
- that the unsound basis on which the decision was taken to permit the Society to remain open to new business, following its loss of the Hyman litigation constitutes maladministration by the FSA; and
- that the misleading information, about the Society’s solvency position and its record of compliance with other regulatory requirements, that they produced during the period after the Society closed to new business constitutes maladministration by the FSA.
