Mis-sellers face theft charges

Scotland Yard is thought to be considering charges under the theft act against salesmen alleged to have mis-sold pensions or endowment mortgages. Although the fraud squad's mis-selling inquiries are currently confined only to sales representatives, it is believed the prospect of theft charges could persuade them to turn Queen's evidence against executives of leading financial institutions.

Such charges would focus on the misuse of promotional literature or other brochures and investment tables by salesmen in dealing with customers. Failure to provide customers with information that would have enabled them to chose the best investments could be caught by the act.

Section 17(b) provides for a seven-year jail term for anyone "dishonestly, with a view to gain for himself or another or with intent to cause loss to another in furnishing information for any purpose produces or makes use of any account, or any such record or document which to his knowledge is or may be misleading, false or deceptive in a material particular".

The fraud squad since spring 1997 has been investigating specific complaints of the mis-selling of financial products, chiefly pensions but also a smaller number of endowment mortgages. Contrary to reports suggesting the squad's real target are "big fish" at the top of leading institutions, its inquiry is concentrating on individual sales agents.

Scotland Yard confirmed yesterday that its inquiry was continuing and that it remained at an early stage, with no decision on charges or statutes having been finalised.

However, evidence of explicit or implicit instructions from senior managers to sales forces to the effect that pensions or mortgages ought to be sold aggressively, regardless of their suitability for the customer, would inevitably take inquiries further and further up the corporate chains of command.

The maximum penalty under section 17(b) is identical to that provided for under section 47 of the financial services act, the more usual legal route for action against mis-selling.

But section 47 contains the defence that the accused reasonably believed that his act or conduct would not create a false or misleading impression. The absence of such a defence in the theft act may make prosecutions easier and the threatened stigma of a theft conviction, as against the impression of a technical rule breach arising from a section 47 conviction, may lead accused persons to incriminate their seniors in an attempt to avoid prosecution.

Use of the theft act may also blunt scepticism among crown prosecutors about the likelihood of success in taking allegations of financial services misselling through the criminal courts.

The Serious Fraud Office already has declined to become involved in the inquiry on the grounds that there is, as yet, no evidence of "serious or complex fraud".

Although the fraud squad investigation combines allegations of the misselling of both pensions and endowment mortgages, the two cases have very different histories.

Whereas the £11bn pension mis-selling scandal relates to the six-year period between the deregulation of occupational pensions in 1988 and the emergence of official disquiet in 1994, endowment mortgages continue to comprise 30% of all home loans, despite widespread concern that they are little more than commission-earning vehicles unsuitable for most mortgage customers.