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Sesame sets aside £31m for customer redress

Sesame Bankhall Group has set aside £31m for customer compensation following a review by parent company Friends Life.

Friends revealed the complaints provision in its half-year accounts last week, adding there was “considerable uncertainty” over the outcome of its review.

The FCA fined Sesame £6m in June 2013 for failing to ensure investment advice was suitable and for failings in systems and controls governing oversight of its appointed representatives.

Friends says it does not expect costs arising from the latest complaints provision to have a “material adverse impact” on the parent company. It says: “The company has given a letter of support to SBG to assist them in meeting their liabilities as they fall due. 

“A number of business reviews are currently being undertaken in these companies and provisions of £31m have been included in respect of customer redress.

“There is considerable uncertainty surrounding the outcome of these reviews, the number of future complaints and the associated costs for dealing with redress and complaint-administration activities.”

But SBG executive chairman John Cowan says the provision in the Friends accounts is misleading as the network has so far used only £4m of a total £35m to cover past reviews.

Cowan says: “Friends had a £35m provision against past business reviews and administration support. 

“There has been capital support from Friends every year since they have owned [SBG].

“We have used £4m of that in the first half of the year. Therefore the figure has gone down from £35m to £31m.”

Of the £4m provision used to date, he says: “It is compensation from our own past business reviews and assessment of cases where people have been poorly advised.”

He adds that the past business reviews and tightening of controls are designed to get the business on a stable footing.

“We have done a lot of work on a project to improve the quality of the business and we are catching cases early where there has been poor advice and we want to put the customer back where they ought to be,” he says. 

“We are on a journey to clean this business up and get it into good shape.”

Cowan says some of the cost of making payments to clients may be recoverable from professional indemnity cover or individual representatives.

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