The retail distribution review (RDR) and professional indemnity (PI) insurance costs have hit RSM Tenon hard, contributing to the firm’s £10 million loss for the second half of 2012.
RSM enjoyed an improved set of results after its well-documented difficulties with its loss for the last six months of 2012 year falling from £70 million in the second half of 2011, to just £10 million. Earnings also improved to £1.5 million compared to a loss of £8.2 million in the equivalent period in 2011.
However, revenues at the advisory and accountancy firm were down, which Tenon blamed on lower business wins in its tax, audit and advisory divisions ‘in part due to the impact of the RDR'.
The company has also had to set aside £1.9 million related to PI expenses for its financial management business.
The results for the second half of 2012 also revealed Tenon was in an ongoing dispute with its PI providers over paying redress to consumers as part of an agreement it made with the Financial Services Authority (FSA) in 2010.
In February 2010 the FSA fined Tenon £700,000 for flaws with its advice on Lehman-backed structured products and ordered it to pay redress to consumers who had been mis-advised.
Tenon said some of its costs related to the FSA settlement were ‘indemnifiable, but that there has been a dispute between the insurers on the programme as to how they should share the indemnity costs’.
It said: ‘The group has sought to recover some of the costs incurred in undertaking the remedial actions required by the FSA Settlement Agreement, including the whole of the redress payments required to be made to investors from insurers subscribing to its professional indemnity programme.
‘A dispute arose between the group and its insurers in the previous financial year as to the extent to which the sums claimed are covered under the programme, and insurers disagree between themselves as to how their liability for those sums should be shared.’
‘These disputes were referred to arbitration and the case was heard between 28 January and 1 February 2013 with the arbitration considering all the costs which have been claimed by the Group under the professional indemnity programme. The decision of the arbitrator had not been delivered at the date of this announcement.’