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Advisers question FSCS U-turn on Rockingham claims


Advisers have questioned the Financial Services Compensation Scheme’s U-turn on ARM Asset Backed Securities claims.

Last week the FSCS announced it is reconsidering claims against Rockingham Independent and other firms over advice to invest in ARM bonds.

In February 2013 the lifeboat scheme ruled out compensating those who had invested in the bonds through Rockingham.

ARM issued bonds based on life settlement policies which were sold to investors in the UK and Europe without the appropriate permissions.

The UK distributor of ARM products was Catalyst Investment Group, which sold the bonds through IFAs.

Out of the 2,000 UK customers who invested a total of £75m into ARM, at least 200 sales were advised by Rockingham.

As ARM is not authorised by the FCA, investors are not covered by the FSCS, but the scheme can still consider claims against advisers that are regulated in the UK.

The FSCS said in 2013 that while Rockingham may have given poor investment advice, this did not cause the losses.

It said the losses were caused by the decision of the Luxembourg regulator to reject ARM’s application for authorisation, and therefore claims could only be made against advisers “under very limited circumstances”.

But the lifeboat scheme says it has received new evidence from claimants and other third parties.

It has identified 70 claims where there is evidence the adviser failed to act on information it held at relevant times about the authorisation status of ARM.

The FSCS says: “In light of this evidence, we believe some ARM investors can now make successful claims against failed financial advisers if negligent advice can be proven.”

Page Russell director Tim Page says: “Just when advisers thought we could put the ARM debacle  to bed, it feels like it is never going to end. I would question the nature of this evidence and whether there should be a cut-off point after which claims cannot be looked at again.

“The fact the FSCS is compensating consumers using other people’s money means they are too eager to widen the envelope on what claims are valid.”

Aurora Financial Planning chartered financial planner Aj Somal says: “This is further evidence of the open-ended nature of advisers’ liabilities. If the evidence is compelling, then it is understandable for the FSCS to look at the claims again, but I do not understand why it has taken so long for this additional information to come to light.

“If this leads to an increase in FSCS levies it will put firms’ finances under further pressure.”

The FSCS will write to all potential claimants to inform them of the decision, while those who remain unaffected will also be told there is insufficient evidence to support their claim. Claimants who have already been compensated up to the FSCS’s investment limit of £50,000 from a successful claim against Catalyst will not have their cases reassessed. The FSCS has already paid out compensation for 3,700 claims against Catalyst for its role in promoting ARM bonds.


September 2011: FSA fines Rockingham £35,000 and imposes partial bans on its directors over sales of ARM bonds and unregulated collective investment schemes

March 2012: Rockingham is placed into liquidation

August 2012: The FSCS says it is investigating whether it should compensate Rockingham clients

November 2012: Rockingham is declared in default

February 2013: The FSCS rules out compensation for Rockingham ARM investors

October 2013: The FCA censures Catalyst for misleading investors when promoting bonds issued by ARM

November 2013: The compensation costs relating to Catalyst trigger a £30m interim FSCS levy on investment advisers for 2013/14, which is later delayed until 2014/15

October 2015: The FSCS says it will reconsider a number of claims from ARM investors against Rockingham after new evidence comes to light



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