Mark Hoban rejects MPs' calls for Arch cru inquiry
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Treasury financial secretary Mark Hoban has rejected calls for an inquiry into the Arch cru scandal and the failures of the FSA and Capita Financial Managers.
There was cross-party support for an inquiry into what went wrong at Arch cru at a parliamentary debate this morning on the £54m Arch cru compensation package agreed by the FSA in June between Capita, BNY Mellon and HSBC Bank.
MP for Rutherglen and Hamilton West Tom Greatrex, who secured the Arch cru debate, said the compensation package appeared to be an “admission of defeat” by the FSA that it could not work out what went wrong and why.
He also led the calls for an investigation into the regulatory failures in not preventing what happened with Arch cru, and into Capita’s role as authorised corporate director of the funds.
But Treasury financial secretary Mark Hoban defended the compensation deal, saying it allows investors to receive a payment by the end of this year rather than having to wait several years for an uncertain outcome.
Hoban said there was a “trade off” to be made, and a decision needed to be taken on whether investors who have lost money invested in Arch cru funds receive money sooner or later.
On whether he would take forward calls for an inquiry, Hoban said: “I am yet to be persuaded that a section 14 inquiry is appropriate. It would certainly not be appropriate to announce one whilst enforcement action is being taken against any party to this.
“It is not the role of the FSA to ensure no firm ever fails, nor is it the role of the FSA to approve the investment strategy of each and every OEIC operating in the UK or to ensure its investments are sound. They are responsibilities that rest elsewhere.”
But Hoban admitted there were lessons to be learned from how the collapse of Arch cru has unfolded.
He said: “It is vital that everyone engaging in this does reflect on the lessons that are learnt from this, that is the regulator, industry players, IFAs, and others. Many issues have emerged from the complexity of the scheme, the need for consumers to have better quality of advice and better financial education. We look very carefully at every lesson learnt from cases like this and it is reflected in our thinking on the FSA.”
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Readers' comments (23)
Craig Barrie | 19 Oct 2011 11:48 am
The FSA decision does not allow "a trade off to be made...to receive money sooner or later" as it denies investors the right to take further action against the guilty parties.
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Anonymous | 19 Oct 2011 11:57 am
Why is it solely Mark Hoban's decision to say whether investors would rather wait a tad longer if there is the prospect of them receiving (close to) their full initial investment amount. The point that people are missing here is that the only ones to blame are Capita and the FSA without a shadow of a doubt; when IFAs gave advise it was based on Capita marketing their fund as cautious - as a result how can it possibly be their fault when it is clearly Capita acting fraudulently, and also the FSA not doing their job properly! I am absolutely appalled at this issue and as a result have lost nearly all confidence in both the FSA and the UK Government. There is seemingly a conspiracy here; why would the government NOT approve an inquiry? Corrupt government? Perhaps.
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Anonymous | 19 Oct 2011 11:59 am
So whats the point of the FSA here?
They have basically admitted they failed in their duty - but it will the Adviser which picks up any shortfall in the compensation!
I don't often think the FSA is poor in what they do - but this is one of those times.....
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kevin murphy | 19 Oct 2011 12:09 pm
“It is vital that everyone engaging in this does reflect on the lessons that are learnt from this.."
And would he care to expand on precisely what lessons HAVE been learned?
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Peter | 19 Oct 2011 12:10 pm
I watched the whole debate and it was so obvious at the end that Hoban wanted the clients to pursue the IFAs.
This guy is a joke he should be working at McDonalds!!
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Anonymous | 19 Oct 2011 12:10 pm
This is one of the most ridiculous outcome's I have ever heard! Surely an inquiry wont cause harm or any further losses to the client, it would be in the clients best interest for an inquiry to be made. Its bad enough clients have had to wait over 2 and a half years to reach this far, so I'm pretty sure if you ask all Arch Cru investors if they wanted to wait a little extra time for the opportunity to regain the whole of their monies, they will all agree and want to pursue this matter further.
I believe the FSA & Capita know they are in the wrong, and they are clearly trying to "Worm" their way out of this drastic situation. If the FSA were confident that they have nothing to fear, then why are they not getting to the bottom of why this whole situation ever occurred in the first place...
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huw | 19 Oct 2011 12:16 pm
This Govt appear to be even worse than the last one if indeed it is possible.
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Richard | 19 Oct 2011 12:39 pm
'This guy is a joke he should be working at McDonalds!!'
I have to ask, "Why should McDonalds have to suffer this guy's ineptitude".
Our studies have told us the the FSA is responsible to the Treasury and by default therefore, the Treasury would be well advised to hide it's failings in the FSA
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Ned Naylor | 19 Oct 2011 12:47 pm
Peters comment - "should be working at MacDonalds" - no one would employ him as he has not got the appropriate NVQ qualifications, he is after all only an MP with very little knowledge of our industry, how it works, what consumers want from it and how advisers should work, what could he put on his CV "worked as an MP shafting the IFA sector "???
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FemaleIFA | 19 Oct 2011 1:01 pm
I too watched the full debate this morning online and MPs slated Capita & the FSA mercilessly
Only to hear Hoban once again spouting off his obviously prepared statement which ducked the issues and basically passed the buck to IFAs.
Although I have to ask why any IFA would suggest client's invest 100% of their savings into one fund or was this a DFM portfolio? Didn't we slate Barclays for doing the same with an AVIVA fund? Fortunately I only ever glimpsed Arch Cru's Africa fund...because of it's supposed ethical aims. Then the rumours started about dodgy investments & I thankfully chucked the prospectus in the recycling bin.
Unfortunately THIS brushing under the carpet ain't going to work this time Mr Hoban -
Regulatory legal have this morning delivered warning notices to 3 parties including the FSA that they intend to legally challenge the FSA's effective limit on FOS claims for consumers because it is against a certain section of the FSMA.
This could get even more interesting!
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