Dear Mr Sants
Re: Traded life settlement funds
I am dismayed and shocked at the FSA’s pronouncement on Monday 28th November. The statement is ill-thought out, partial, emotive and uses language unbecoming of a regulatory authority. The apparent evidence for your concern is inaccurate and baseless and may have far-reaching effects of which you appear to be blissfully unaware.
Traded life settlement policies are not of themselves ‘high risk’ or ‘toxic’, they are simply Traded life settlement policies. In the US, in the event that an insurance company cannot meet its liabilities, the state in which the company is based will underwrite the loss, if the state is unable to pay, the Federal Government guarantees the policy. Can you please explain to me what is ‘toxic’ or ‘high risk’ about that?
The collapse of Keydata was ultimately down to fraudulent activity which the FSA failed to spot, not that there was anything wrong with the underlying investments.
The only TLSF we use is the EEA Life Settlement Fund. We have conducted exhaustive due diligence on this fund as well as obtaining further evidence from larger investment companies who have deeper pockets and more resource than we have, to satisfy ourselves in every respect that the fund is run in a fit and proper manner. For you, on a whim, with no foundation, to arbitrarily condemn their company and its product is quite breathtaking.
As a result of your outrageous, unfounded announcement, EEA has had to suspend dealing. If and when the firm is able to resume activity, the likelihood is that they will have to liquidate their holdings at distressed prices, meaning that investors will not get back all (any?) of the money they invested and the FSA will be able to smile smugly and say ‘I told you so’.
Meanwhile, those same investors have been enjoying a steady return of about 8% per annum at a time when much safer investments such as equities have been all over the place. Income-seekers have been very happy with an 8% return as you might imagine with base rate at 0.5%, but you have now well and truly scotched that one. Investor protection? Give me a break.
Although EEA run a number of other funds, the Life Settlement Fund is significantly larger and one assumes that the bulk of the company’s income comes from that fund. There is now a very real chance that EEA will fold. I don’t know the exact number of employees in Billiter Street EC3, but at a guess it will be at least 25 – all of whom might well be out of work in a few months time. Well done! Congratulations!
May I wish you and Margaret Cole a very Happy Christmas and prosperous New Year.
Yours sincerely
Neil Shillito, director
SG Wealth Management
