The Consumers Association of Ireland has called for urgent investigations by the Department of Enterprise, Trade and Employment and the Society of Actuaries into allegations that investment funds were manipulated to benefit some investors over others.

In a recent High Court wrongful dismissals case a former Abbey Life fund manager Mr Graham O'Neill made allegations about malpractices at the insurance company in the late 1980s and early 1990s. He claimed that a group of 12 key insurance brokers who had placed funds with Abbey Life benefited at the expense of other policyholders. The performance of their funds was enhanced, he alleged, through the switching of pricing with the benefit of hindsight from one fund to another. Canada Life Assurance (Ireland), which bought Abbey Life in 1992, and its former owner Lloyds Abbey Life denied all of Mr O'Neill's claims. The case was settled on March 9th. The parties declined to disclose the settlement terms.

"This case brought to light a concern we have had for years that the pricing model used in Irish unit funds is open to manipulation," Mr Eddie Hobbs of the Consumers Association claimed yesterday. He called on the Department to publish the findings of any investigation.

A Department source said a meeting had been arranged with Canada Life next Monday to discuss the allegations. Depending on the outcome of that meeting the Department would decide whether an investigation was required. "We want to know what the Society of Actuaries intends to do and what the Department as the regulator of the insurance industry intends to do," said Mr Hobbs. "Doubt has now been clearly established as to the honesty of the unit-pricing system and until the allegations are fully investigated customers have to be concerned," he added.

The pricing model for unit funds in the Republic is different from that used in Europe and the US, according to Mr Hobbs. In the Republic, the smoothened equity unit-pricing system allows actuaries to vary unit prices against asset values in the fund, he said. But in the US and Europe it is illegal. According to Mr Hobbs this means that when a fund actuary is striking prices for entry and exit to a fund, this price does not have to reflect the true value of the assets in the fund.

Since a managed fund could be invested in a number of other funds this creates an opportunity to manipulate performance so that some funds could perform well at the expense of others, he contended.