The move threatens to cause severe ructions within the organisation, widely seen as a target for Clive Cowdery's life insurance venture, Resolution, which is seeking to create a UK super insurer and is in need of bid targets to make good on its promises after combining the UK business of Axa with Friends Provident.
The FSA said Scottish Equitable, which now trades as Aegon UK, approached it in 2009 to inform it of a litany of administration problems, always a vexed issue with life insurance and pensions policies. The various glitches identified included: not issuing around 238,000 policyholder documents and incorrectly calculating the guaranteed minimum pension payments and future benefits of 774 Scottish Equitable customers.
The company was also hauled over the coals for failing to identify errors in calculating rebates to charges on pension policies for 25,000 policies, for not matching Department for Work and Pensions contributions to personal pensions for around 2,500 customers; and for failing to trace around 200,000 policyholders who had moved without informing the company of their new addresses.
By the end of the month the operation will have paid compensation of £30m to 181,500 customers, with the remaining £30m due to be paid out by the end of next year. The FSA said that prior to 2009, Scottish Equitable had attempted to deal with problems with the back-office functions and IT infrastructure on an "ad hoc, decentralised basis". According to the watchdog, some of the problems dated back as far as the 1980s.
Margaret Cole, FSA managing director for enforcement and financial crime, criticised the company saying: "By letting the issues build up over such a long period Scottish Equitable Plc made it even more difficult to fix the problems and this led to delays in getting compensation to customers."
The issue will also come as a huge embarrassment to Scottish Equitable's Dutch owners. The company has been in the middle of a strategic shake up and while Aegon has said it will stick with it, informal discussions are thought to have been held with Mr Cowdery's team. News of the administration problems could also raise questions about the future of the Aegon UK chief executive, Otto Thorensen.
Much of the heavy lifting designed to reshape the company – which has seen hundreds of job losses – is understood to have been handled by Adrian Grace, his ambitious deputy who has been spearheading the restructuring programme. Aegon said: "We've been running this programme since May 2009 – we are now halfway through the redress programme and will have paid £30m of redress to around 181,500 customers by the end of 2010."
City trader banned
A star trader was yesterday banned from the City and fined £750,000 after hiding losses of £48m on his trading book. The City watchdog also fined his employer, Toronto Dominion Bank, £7m.
The Financial Services Authority said between July 2006 and June 2008, Nabeel Naqui, a managing director at Toronto Dominion and head of its CPG Europe and Asia Pacific desk, "persistently mismarked his trading book in order to overstate his performance and took steps to ensure that this was not detected, providing deliberately altered quotes to those conducting an independent valuation" of the bank's positions.
The watchdog said Mr Naqui, made redundant at the end of June 2008, knew his conduct would not have been tolerated as it had taken enforcement action against his colleague Simon Brignall, banned for mismarking, in 2007. His misconduct overlapped with Mr Brignall's and continued after Mr Brignall's ban. For the latest updates PRESS CTR + D or visit Stock Market news Today
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