FSA turns over death bond firm Catalyst to enforcement

The FSA has referred Catalyst Investment Group to its enforcement and financial crime division over the firm’s distribution of bonds backed by life settlement policies.

Catalyst was the UK marketing and distribution agent for ARM Asset Backed Securities, a Luxemburg-based securitisation vehicle. ARM bonds based on life settlement policies were sold via distributors to UK and European investors without the appropriate permissions.

A total of 2,000 UK investors invested a total of £75m in ARM bonds. At least 200 sales were advised by Rockingham Independent, which was fined £35,000 over sales of the bonds and unregulated collective investment schemes.

In August 2010, the FSA withdrew Catalyst’s permission to distribute the ARM bonds, saying the company continued to accept cash payments despite ARM having been instructed to stop issuing the securities in November 2009. The supervisory notice was published in September 2011.

The Luxemburg regulator refused ARM a licence to issue bonds in August, in a move that forces the vehicle’s liquidation. ARM has appealed against the decision and applied for a jud- icial review of the decision to the Luxemburg court.

An FSA spokeswoman has confirmed Catalyst has been referred to enforcement but declined to comment further.

In a statement to the Finan- cial Times this week, Catalyst said it had “retained legal serv- ices in connection with the FSA’s investigation.”

In November, the FSA warned that ARM investors face “considerable legal uncertainty” over the money invested, and revealed it had instructed UK banks not to move money being held in relation to the ARM bonds without the permission of the Luxemburg regulator.