THE former legal chief of the Financial Services Authority has censured the City regulator for its “selective” description of the verdict in the landmark Legal & General case last week.

Michael Blair, QC, who was general counsel to the FSA board until 2000, said that the FSA should have produced a “true and fair” description of the verdict.

Instead, according to Mr Blair, the FSA’s formal press release on the case concentrated on its success in getting one element of its case upheld and played down the fact that the FSA’s key finding of “systemic mis-selling” had been overturned.

“Elements of the statement were selective,” Mr Blair said. “I’m surprised they didn’t adhere to higher standards.”

The impression in the statement was that the FSA was 75 per cent vindicated, Mr Blair said, while in reality the figure was more like 40 per cent, with L&G having the edge.

In its mixed verdict, the Financial Services and Markets Tribunal sharply criticised the FSA’s Regulatory Decisions Committee (RDC) for errors in assessing the evidence.

The official FSA statement largely ignored this finding, instead emphasising the mitigating circumstances in support of the FSA. The RDC was not mentioned at all.

Mr Blair, who specialises in financial services work, said that he expected the FSA to be scrutinising its procedures. This would be an early priority, once it had hired a new head of enforcement to replace Andrew Procter, who is leaving for a compliance job at Deutsche Bank.

The L&G challenge to a £1.1 million fine for endowment mis-selling was seen as a key test for the FSA, which many financial institutions see as heavy-handed.

The case remains open and L&G is now pushing to have its £2 million costs paid by the FSA and for the fine to be substantially reduced. L&G also has the right to ask the tribunal to make recommendations on reforms to FSA procedures.

In its response to the tribunal, the FSA, which posted the full tribunal verdict on its website, said: “The tribunal upholds the FSA’s case that L&G’s sales procedures were defective and finds that ‘these procedural defects will have caused or contributed to mis-sales’.

“The tribunal finds that the FSA was not justified in this case to extrapolate from a sample to reflect a pattern of general mis-selling, but goes on to state that ‘common sense indicates that there will have been a fair number of mis-sales beyond the eight that have been established’.”