FSA says IFAs must take responsibility for Arch cru losses
Share
The FSA believes IFAs should accept responsibility for investor losses over Arch cru and says it may look to conduct an an industry wide past business review and order redress if it finds evidence of misselling.
The regulator held a closed meeting with 40 MPs and representatives of a further 20 MPs yesterday over the £54m compensation package for Arch cru investors agreed by the FSA with Capita Financial Managers, BNY Mellon Trust & Depository and HSBC Bank in June.
FSA conduct of business unit managing director Margaret Cole (pictured) told MPs that IFAs had the most direct relationships with investors and should be the first place to look in terms of resolving the Arch cru case.
Cole said: “It is not good enough that some IFA firms say they have no responsibility for investor losses and that some of them seek to distract from their own possible responsibility by demanding that others pay more.”
Cole cited the provisional decision published by the Financial Ombudsman Service earlier this week which upheld a complaint against an IFA who recommended clients to invest in Arch cru. The adviser has been ordered to pay redress based on return of their original £8,000 investment, plus interest, less anything they receive from the compensation scheme.
If the compensation scheme is withdrawn following the legal challenges being launched by Justice for Financial Services and Regulatory Legal, the IFA will also be responsible for what would have been payable under the compensation scheme.
Cole said it was not realistic to get the 900 IFAs involved in recommending Arch cru “round the table” in the same way as they could with Capita, BNY Mellon, and HSBC. It is estimated that over half of the140 firms who accounted for 90 per cent of Arch cru sales are no longer trading.
Cole added: “If we find that IFAs are liable for mis-selling Arch cru investments, then we as the regulator have a number of options open to us, including the power to seek an industry wide past business review and redress if we find widespread failure. That is complicated, it requires certain process and will take time to sort out.
“But we were able to get Capita, BNY Mellon and HSBC ‘round the table’ and to secure some money for investors now. We thought that was worth doing - to obtain a definite and certain pot of money for investors.”
In its annual accounts to the end of March published earlier this month Capita admitted there is “significant difficulty and uncertainty” in assessing the value of the Arch cru funds.
If you enjoyed this article, sign up here to receive daily email updates from Money Marketing and Follow @_moneymarketing
View results 10 per page | 20 per page
Readers' comments (16)
Anonymous | 24 Nov 2011 10:48 am
They aren't going accept responsibility for anything themselves are they!
Unsuitable or offensive? Report this comment
Joe Egerton - Justice in Financial Services | 24 Nov 2011 10:49 am
I do not know what is in the RL judicial review, but the effect of the Coull Money Judicial review contains arguments that if accepted by the Courts would make it hard for FOS to hold IFAs responsible at all
Unsuitable or offensive? Report this comment
Anonymous | 24 Nov 2011 10:53 am
Cole blaming everything that has ever gone wrong in the history of the world on IFAs again - what a surprise!
Unsuitable or offensive? Report this comment
Anonymous | 24 Nov 2011 11:04 am
Having never sold any Arch Cru, however the ramifications re potential liabilities for all IFA's should a fund/provider have issues due to fraud/ malpractice / missmanagement etc etc are too big a threat to have hanging around.
RDR and qualification issues are becomming insignificant compared to this Elephant in the room especialy without a long stop.
Time to do something else to earn a crust
Unsuitable or offensive? Report this comment
Anonymous | 24 Nov 2011 11:07 am
The FSA approve and regulate, the fund is mismanaged and reports to the FSA and when it all goes wrong the common statement is "It is not my fault!". Get a grip FSA you need to accept responsibility for something, it can't all be the advisers fault all the time.
If you continue in this way the FSA will not exist because there will be no financial service to police. IFAs will not recommend investment funds in case they go wrong.
We already pay out for failures of companies that fail that have nothing to do with us, whatever next?
Unsuitable or offensive? Report this comment
Chris Clark | 24 Nov 2011 11:09 am
So how does the FSA go around making specious threats to sue IFAs when they were quite happy to tell IFAs who asked for their opinion there were no issues with the funds - 6 weeks after the FSA's ARROW inspection found all the issues we now know there were with the funds.
Unsuitable or offensive? Report this comment
man on the moon | 24 Nov 2011 11:28 am
The funds had a great story. Elevator like upwards only returns.
private equity? slick marketing - sexy young girl on a chaise longue.
turned out to be crap.
that said some Advisor were negligent, Arch and Cru, Capita and the FSA are also.
The silly servants are not so silly in protecting their own unaccountable roles.
Unsuitable or offensive? Report this comment
Peter Turner | 24 Nov 2011 11:29 am
Am I not correct in thinking that it was the FSA that was supposed to determine that Arch Cru was fit and proper, that it was supposed to determine that Arch Cru had adequate capital resources and that it was supposed to ensure that Arch Cru had proper procedures in place BEFORE it authorised it to conduct business.
If, with all the resources and powers available to it, it was unable to find to the contrary, I fail to see how any amount of effort at due diligence by an IFA would have uncovered anything that the FSA did not.
Unless, of course, the FSA is guilty of misregulation.
Unsuitable or offensive? Report this comment
Simon Kershaw | 24 Nov 2011 11:29 am
I find it appalling that this woman can threaten dire retribution on thousands of innocent IFAs.
Get it straight Ms Cole, the IFA community is not at fault here. The FSA has clearly been found asleep on the job and should admit it publicly.
Unsuitable or offensive? Report this comment
Claire | 24 Nov 2011 11:43 am
I am very confused. Yesterday's reports about the meeting with MPs stated that Ms Cole had agreed that Capita. BNY Mellon, HSBC and the Channel Island Exchange would get together and review the compensation offer. A few short hours later and, not being face to face with MPs, she seems to have gone against this completely. Was yesterdays meeting mis-reported, or are our MPs accorded so little respect by the parties concerned that they are happy to brazenly change their tune so quickly? Still, our MPs do represent us, so it is to be expected they should be on the receiving end of the same shoddy, shameful treatment.
Unsuitable or offensive? Report this comment