RSA is fined €2.1m for pensions mis-selling

Royal & Sun Alliance (RSA) was yesterday fined a record £1.35 million (€2.1 million) for failing to identify thousands of people who were wrongly sold pension policies, compounding the troubles of the British insurer.

The Financial Services Authority (FSA), the City regulator, also made an outspoken attack on management failings at the insurer and said, without its investigation, some 13,500 customers might have missed compensation totalling more than £32 million.

The latest blow comes at a difficult time for Mr Bob Mendelsohn, RSA chief executive, whose position has looked vulnerable since he admitted earlier this month that the group was considering a rights issue to satisfy its need for more capital.

Some institutional shareholders have said they would only support a cash call if Mr Mendelsohn stepped down, and the FSA's actions are likely to increase pressure on him.

One leading investor, who declined to be named, said: "It would appear that more bad news than good is coming out of the company. Maybe he's not a lucky chief executive and generals need good luck."

Ms Carol Sergeant, FSA managing director for regulatory processes and risk , said: "Royal & Sun Alliance failed in its identification of customers who might have been due redress, it failed to complete review work on time and its management failed to monitor the process effectively."

Stressing the FSA was determined that consumers who were due redress should have their cases dealt with in a timely and effective manner, she said: "The responsibility for delivering this rests with senior management, who must ensure proper control and monitoring of such work."

The FSA said that when its pensions review monitoring department visited RSA in July and August of 2000, it found limited evidence of effective management control of the review. The group had already been fined £225,000 in 1998 and ordered to pay £100,000 costs for earlier failures concerning the pensions review.

The regulator said yesterday: "Subsequent remedial work identified weaknesses in the management control and monitoring of the review, including the use of poor-quality management information."

RSA said it very much regretted its mistake and had taken steps to ensure it did not happen again. - (Financial Times Service)