FSA refers life settlements distribution agent to enforcement

The FSA has referred London-based Catalyst Investment Group to its enforcement and financial crime division.

Catalyst was the UK marketing and distribution agent for ARM Asset Backed Securities, a special purpose vehicle based in Luxemburg, which saw its assets frozen by the Luxemburg regulator in August 2011.

The Luxemburg regulator refused to give ARM a licence to issue bonds there, highlighting prudential, legal and regulatory concerns.

The FSA withdrew permission for Catalyst to distribute the bonds in August 2010, saying the company continued to accept cash payments despite ARM having been instructed to stop issuing the securities in November 2009.

A September 2011 notice from the FSA said that this particular aspect of Catalyst’s business “presents a risk to consumers” and that investors’ money that was taken after the bond issue was stopped, which is estimated to be at £12.5m, had “not been invested in the way investors would have expected”.

The Financial Times says that more than 2,000 UK residents have invested around £75m in the income and capital growth bonds between 2006 and 2010. Investors, many of whom are at or approaching retirement, cannot access their money as ARM has had its assets frozen and the UK authorities have no powers to return cash held in UK accounts or offshore.

Catalyst, which has challenged the reasons for the FSA’s supervisory notice in 2010, said it “retained legal services in connection with the FSA’s investigation”.

The FSA announced plans to ban senior life settlements last year, claiming they are too complex for the mass retail market.

In September Rockingham Independent was fined £35,000 for putting 426 clients at risk of receiving unsuitable advice, over 200 of whom were sold ARM bonds.

The FSA warned in November ARM investors face “considerable legal uncertainty” around the money invested.