Regulator rapped over Lehman FSD response

The regulator has been admonished by a High Court judge for imposing a time limit on a response to its warning notice against Lehman Brothers Holdings International (LBHI), which is the job of its independent determinations panel.

But schemeXpert understands even the panel’s new limit – until September 15, two years from the investment bank’s going into administration and under law the maximum stretch for imposing an FSD – will still be challenged as unreasonable.

LBHI is expected to argue the complexity of the case, which involves hundreds of one-time Lehmans subsidiaries, is enough to render the timescale offered insufficient to make a case.

If the courts uphold this objection, the regulator will lose any chance of imposing an FSD, as the two-year limit for initiating the proceeding will have been exceeded.

Now a Pensions Week - schemeXpert's sister publication - poll of London’s top pensions lawyers has revealed 70% believe the regulator did not offer LBHI enough time to respond.

One anonymous respondent accused the body of failing to show “common sense” in its handling of the issue, and claimed it should have offered Lehmans “progress updates” during the 20 months it spent between the bank’s administration and the warning notice.

The lawyers were also broadly in favour of retaining the statutory two-year maximum time between a sponsor’s insolvency and issuing an FSD. Half of those quizzed said it does not need a longer time, to 40% claiming it does, with the remaining 10% not offering a view.

“The regulator has been very vocal about encouraging internal controls and project management on trustees of schemes, so I would expect it should be able to apply the same principles to its own operations,” said one lawyer.

The respondents were also scathing about the regulator’s perceived dithering over the FSD. One lawyer, while accepting the regulator’s lack of resources is a factor, added: “They consistently seem to pick the wrong targets.”

The regulator said: “The length of any investigation and the consequent deadlines set will of course be determined by the complexity of the case.”