The Humble Petition of the Presbyterian Mutual Society,
Sheweth that the Prime Minister should provide similar governmental guarantees to UK mutual societies as for banks; notes that the catalyst for the financial difficulties experienced by the Presbyterian Mutual Society arose after the Government applied their existing guarantee under the Financial Services Compensation Scheme to a number of UK Banks and Icelandic Banks; notes that this resulted in a large number of investors with the Presbyterian Mutual Society withdrawing their deposits; and acknowledges that with Government intervention the Society could be returned to its sound financial footing.
Wherefore your Petitioners pray that your Honourable House will urge the Prime Minister and the Chancellor of the Exchequer to extend the Financial Services Compensation Scheme to include the Presbyterian Mutual Society and seek to secure appropriate intervention from the financial sector to provide a basis on which all members will be able to recover their investments in full.
And your Petitioners, as in duty bound, will ever pray, &c.—[Presented by Mr. Jeffrey M. Donaldson, Official Report, 21 April 2009; Vol. 491, c. 206 .]
Observations from the Chancellor of the Exchequer:
The Government notes the petition, and makes the following observations:
The Government sympathises with the extremely difficult situation faced by members.
Organisations such as PMS, which are registered as Industrial and Provident Societies (IPSs), are exempt from regulation by the Financial Services Authority (FSA) in respect of accepting deposits in the form of withdrawable share capital. PMS is not authorised by the FSA to accept deposits in any other form—for example, in the form of a conventional bank deposit.
Members’ deposits in an IPS are held in the form of withdrawable share capital, which means that members “invest” in their society in a similar way to as if they had purchased shares in a company. This means that their money forms the risk capital of the society, and in the event of a failure may be lost. Societies should make clear to members that their deposits constitute risk capital.
Under IPS legislation, any one member’s shareholding is limited to £20,000. Being outside of FSA regulation, PMS and its members do not contribute to, and are therefore not protected by, the Financial Services Compensation Scheme (FSCS).
It must also be emphasised that IPSs in Northern Ireland are a devolved matter. PMS was registered under the Industrial and Provident Societies Act (Northern Ireland) 1969 with the relevant authority, the Department of Enterprise, Trade and Investment in Northern Ireland.
The FSA has investigated the activities of PMS and concluded that the society was conducting regulated activities without the necessary authorisation or exemption under the Financial Services and Markets Act 2000. However, on the basis of the information currently available to them, and applying the criteria set out in the Code for Crown Prosecutors, the FSA has decided that it would not be right for them to prosecute any of the people involved in running PMS. The FSA remains in touch with the administrator for PMS and have said that if further information comes to light relating to the issues they have investigated, they will look into it.
The Administrator will be making a statutory progress report on or before 16 June and I understand that a formal arrangement for winding up the Society will be put to members in September. The Administrator's website states he is currently finalising his investigation into the conduct of the directors of the Society prior to it entering administration and his findings will be presented to the Department of Enterprise, Trade and Investment shortly.