I’m a Philips Trust victim - this is why FCA was wrong not to investigate role of building societies in £138m scandal: Shaun Carroll

I’ve previously read all of the excellent articles by Chris Burn and the editorial comments published by The Yorkshire Post involving the elderly demographic caught up in the fall out of the Philips Trust Corporation collapse, and subsequent administration.

But it was the news contained in the Financial Conduct Authority announcement on March 22 which has prompted this letter.

The statement, first reported in The Yorkshire Post, outlined the FCA’s position with the following: “Our understanding, supported by the administrator, is that it was the actions of PTC, not the building societies, which caused customers to experience investment losses. We can’t hold the building societies responsible for the actions of PTC.”

To drop this on victims in this manner is in my opinion callous, disrespectful and for some may well be potentially life threatening given the age demographic.

The biggest irony of all is victims have never asked for building societies to be held responsible for the actions of PTC. They just want building societies held responsible for their actions.

Any possible future action taken against PTC will prove cold comfort for many of those embroiled in this mess.

I firmly believe the real scandal in all of this is the involvement of building societies, including such big players as Leeds Building Society, Newcastle Building Society and Nottingham Building Society to name but three.

I also feel there’s a need to challenge the FCA decision not to investigate building societies using the very ‘principles for business’ cited by the regulator.

Let us start with the principle of integrity, for example. It’s easier to promote the idea of honesty to customers when things are going well yet far harder to keep up the pretence should it turn sour or worse still, be challenged as wrongdoing or negligence.

From the very personal accounts revealed in Chris Burn’s articles and other details presented to date, my unreserved opinion is that customers were not dealt with honestly from the very beginning. Nor have societies been totally transparent about their actions from those first meetings inside branch offices.

The question of whether mutuals involved pass the integrity test leads me nicely into another of the FCA principles, namely that a firm must conduct its business “with due skill, care and diligence”.

Victims’s complaints – that of being referred to an unregulated third party for financial gain – leads me to seriously cast doubt over this aspect of the FCA guiding principles.

Key questions being raised by complainants in many cases have been ignored completely. Victims say they have serious doubts anyone had actually read their complaints correctly before responding.

Even allowing for some degree of inaccuracy among the personal recollections of victims, the strong impression remains that the building society was going to great lengths to avoid answering questions, rather than enter into any meaningful dialogue to find a resolution.

Regrettably there appeared little those complaining could do about that other than challenge them.

It does however raise further questions and concerns in my mind about how building societies now conduct themselves. This is specifically in regard to the skill, level of experience and diligence of branch staff to ensure sufficient care was taken to understand and meet members’ needs.

If anything, it’s easier to believe these predominantly elderly members were consciously targeted.

While that is open to conjecture, what isn’t in my opinion was specifically not being informed that the third parties they were being referred to were unregulated and societies would also be receiving secret or hidden commission payments at a later date.

Both are crucial elements members needed to know prior to making any kind of decision which carried an element of personal risk.

On that basis I believe Leeds Building Society and the others involved in this scandal not only failed that leading guiding business principle, but also another in the form of ‘Customers’ Interests’ whereby a firm must pay due regard to the interests of its customers and treat them fairly.

By withholding key information from members I certainly don’t believe any of the societies involved had elderly members’ best interests at heart during that time.

If anyone actually believes that isn’t unfair then I would love to read their reasons.

Another of the FCA principles is ‘Management and Control’, whereby a firm must take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems.

This throws up all sorts of concerns over the way in which branch staff operated when they facilitated referrals.

That is everything from staff training, promotions and marketing, line management, internal communications, record keeping, approvals to proceed, and last but not least what risk assessments and procedures were in place to protect society members.

No details have emerged on why such referrals were perceived to be suitable for those specific members in the first place.

The pertinent fact these financial institutions allegedly don’t know how many members were referred to their unregulated partners and ultimately into the hands of PTC, speaks volumes.

This is another glaring failure to comply with FCA principles and guidelines as a regulated business, in my opinion.

This throws up a further series of failures among the FCA principles, namely ‘communications with clients’, ‘conflicts of interest’ and one I suggest to be considered the most important of all, ‘customers: relationships of trust’.

Certainly based on information received by The Yorkshire Post, the All Party Parliamentary Group on Personal Banking and Fairer Financial Services, and other supporting evidence gathered by various publications it is quite apparent there were serious anomalies present among working practices at branch level.

The answers given to avoid any kind of accountability only further compounds the belief that what society members experienced was not for their long term benefit.

It is all the more surprising that the FCA didn’t see it this way.

A further key FCA principle is ‘Relations with Regulators’.

This principle states that a firm must deal with its regulators in an open and cooperative way, and must disclose to the appropriate regulator appropriately anything relating to the firm of which that regulator would reasonably expect notice.

This is something which has intrigued me for some time. Were the FCA aware building societies were in partnership with unregulated third party companies who they referred society members to? If not, why?

This is far from a personal crusade yet I sincerely believe that what I now propose is called ‘The Building Society Scandal’ will have as far reaching impact on mutual building societies as the PPI scandal had for banks.

Perhaps it’s unsurprising therefore that the FCA and the societies involved are running scared.

The eventual financial consequences, level of reputational damage and other possible punitive action currently remain unknown, albeit all parties will be tarnished in some form or other.

However be under no illusion, as with the Post Office Horizon scandal, this matter is not going to disappear.

All society members should not be taken for granted or ignored no matter the age demographic, particularly when they make complaints.

Most crucially, there has to be some form of accountability in place to protect members from exploitation or abuses of power.

The elderly members impacted by this scandal may appear to be strangers, however they’re not. They are conceivably your parents or grandparents, aunts and uncles, family members, all who tried to do what they believed was right for them and their loved ones by putting faith in an organisation they had grown up with and trusted.

Sadly they were let down to such a degree it has become one more major financial scandal among many which desperately needs resolving.

What happened to them previously, could happen to you tomorrow. Think about it and raise questions with those in control of your respective building societies before it’s too late.