Advisers have hit out at the FSA over its decision not to levy a fine against Capita Financial Managers despite “serious failings” in the way the company oversaw the Arch cru funds.
The FSA announced earlier today it has censured Capita for failing in its role as authorised corporate director of Arch cru. The final notice against Capita reveals the breaches “would have ordinarily” led to a £4m fine, but the FSA says in this case that was not appropriate.
The regulator says Capita Financial Managers could not fund both its contribution to the £54m payment scheme agreed in June 2011 and a financial penalty, which is why the FSA has chosen not to levy a fine on the company. Parent company Capita Group contributed £32m to the payment scheme, with depositories HSBC and BNY Mellon paying the remainder.
The FSA has proposed a separate £110m consumer redress scheme which if approved will require advisers to review their Arch cru sales and pay redress where appropriate. It was reported this weekend the decision on whether to go ahead with the scheme has been delayed following an overwhelming industry response. The FSA estimates that £33m could fall on to the Financial Services Compensation Scheme.
IFA Centre managing director Gill Cardy says: “Capita FM appears to have got off with a censure because apparently it cannot afford a fine. But the FSA will happily expect advisers to pay, irrespective of whether they can afford it and the costs that will fall on the Financial Services Compensation Scheme. It is totally unacceptable.”
Cardy is planning an open letter to the regulator about the inequality of Capita’s treatment by the regulator over Arch cru compared with the proposed redress scheme paid for by advisers.
Informed Choice executive director Nick Bamford says: “Nobody has ever been told how the amount Capita paid to the payment scheme was calculated. I do not understand why it is OK for firms like mine and many others, who did not sell Arch cru, to pay compensation through the FSCS but poor old Capita, who was hugely responsible for this debacle, has already paid enough.
“It does not seem right or fair. The FSA cannot possibly let Capita off the hook and expect others who are totally unconnected to Arch cru to pay.”
Attain Wealth Management managing director Gordon Crothers says: “There seem to be some double standards at work. So what if Capita has already made a contribution? I will still be expected to pay, even though I have not been involved with Arch cru. Advisers cannot afford to keep paying out just because there are some big companies who have not done their due diligence correctly.”
Association of Professional Financial Advisers policy director Chris Hannant says: “We have been very concerned the FSA agreed a limit on liability with Capita and other organisations at a stage when it had not completed its investigations, which seemed premature to say the least.
“It does not seem right that firms should be able to evade fines or punishment just because they say they are impoverished. And yet the FSA is quite happy in the context of the redress scheme to see adviser firms go out of business. It seems there are different levels of fairness being applied to different entities, which may be proportionate to the kind of law firm you can afford to hire.”