Perfectly Legal

Two morality tales about culture and the free market. Some libertarians believe that a free market and enforceable contracts are all that's needed for virtue to triumph. I have never agreed.

Peter Hitchens has spoken of police who enforce the letter of a beaureaucratic law rather than the spirit of an agreed moral code. Adam Smith believed that free markets were, and should be, underpinned by Christian morality. Let's have a look at these two business deals and see what you think.

It was the late 1980s, and Mrs Thatcher's government had passed legislation enabling council tenants to buy their homes at a hefty discount to the market price. The longer you'd been a tenant, the greater the discount. Our hero, a young Tory MP who had made a million from oil trading by the time he was thirty, was living in a block of Westminster flats, some of which were still council owned. Like his elderly and impecunious neighbour's. So a deal was struck. The MP would put up the money for his neighbour to buy the freehold at a huge discount to the open market price. The elderly man would live rent-free for the rest of his life, and on his death the Tory MP would become the owner of a very desirable bit of property.

At the time (I was then a Labour Party member) I considered the transaction despicable. I still do. Remember, he was an MP for a government who had passed the legislation with the express intention of enabling poorer people to become homeowners, not to further enrich millionaires. But, in a phrase we were destined to hear more and more in the ensuing years, he had 'done nothing illegal'. Today the MP is a Tory Front Bench spokesman.


Move forward fifteen years or so. The pension transfer scandal (where clients were mis-sold personal pensions or wrongly advised to leave company schemes) has been on the public radar for a long time now.

Some firms of Independent Financial Advisers (IFAs) have closed or gone into liquidation, and so are unable to compensate the victims of mis-selling.

To help such people the Government regulator, the Financial Services Authority (FSA), have set up a scheme called the Financial Services Compensation Scheme (FSCS), funded by a levy on existing IFA firms, which will enable the investors to be compensated.

There was until recently a firm of IFAs called Berry Birch and Noble Financial Services, owned by a holding company called Berkeley Berry Birch (BBB). The directors of the holding company looked at the outstanding compensation liabilities of BBN, and obviously didn't like what they saw.

So a decision was taken to
a) transfer the IFA salesforce from Berry Birch and Noble Financial Services to the previously dormant company Berry Birch and Noble Financial Planning, also owned by BBB.
b) Put Berry Birch and Noble Financial Services into liquidation
c) At which point the outstanding pension transfer liabilities would fall onto the Financial Services Compensation Scheme rather then remaining within BBB.

All perfectly legal. But, as the firm's (retired) founder Derek Berry said, 'The stigma will make the firm's name stink'. And so it should. Would you trust these people with your money ?

BBB are publicly quoted. According to the trade paper Money Marketing (from which this story is taken), shareholders include Clerical Medical, Norwich Union, Friends Provident, Scottish Widows and Standard Life. Some of your money is probably invested with BBB. Should it be ?