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Advisers urged to respond to Arch cru redress plans

Advisers are being urged to respond to the FSA’s consultation to set up a £110m Arch cru consumer redress scheme as the regulator signals its disappointment at the quality of responses so far.

Yesterday, it emerged that the FSA board is undecided over whether to implement the scheme, also known as a section 404 scheme, given the associated risks.

The FSA launched the consultation in April to set up the redress scheme for 20,000 Arch cru investors. If implemented, IFAs who recommended Arch cru funds will have to review all cases and pay redress where appropriate.

The consultation closes on 31 July. Money Marketing understands the regulator is disappointed with the quality of responses it has seen so far, particularly template responses from advisers which have not been comprehensive enough.

Foot Anstey partner Alan Hughes (pictured) says while it is likely the redress scheme will go ahead, advisers still have an opportunity to secure “material changes” to the way the scheme is implemented.

He says: “The board is split on whether a section 404 scheme is appropriate. Consequently it is worth IFAs and interested parties making reasoned and coherent responses.

“It is by no means certain a section 404 scheme will go through, but what is more likely is advisers might be able to get material changes if they put forward a strong enough case. It is not a done deal in its current form.”

If the redress scheme goes ahead, firms will have to review whether advice to invest in the Arch cru funds was suitable using a template from the FSA.

Hughes says the FSA’s template does not consider the use of Arch cru funds as a small part of a client’s portfolio to reduce its volatility.

He says: “A lot of people did use Arch cru in that way. We are making quite specific representations to the FSA that the assessment template needs to change to take that into account.

“If the scheme goes ahead, at least it could go ahead in a form which narrows its scope and could therefore save lots of people money.”

FSA estimates suggest the scheme could cost the FSCS £30m and lead to 30 per cent of IFAs who sold Arch cru policies going out of business. The FSA recently warned professional indemnity insurers it is prepared to take action against insurers attempting to sidestep their liabilities in relation to Arch cru claims.

An FSA spokeswoman says: “We would encourage people to come to us with their feedback. This is a consultation and the scheme would be the first time we have used these powers, so we are keen to hear what the industry thinks.”


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There are 9 comments at the moment, we would love to hear your opinion too.

  1. Robert Johnsey 27th July 2012 at 3:10 pm

    The FSA should read the blogs on here and Citywire if they want to know what we think.

    Personally I am way too frightened of them to personally reply to their ‘consultation’

  2. Fed up sending replies to these things. They NEVER listen and take action. The FSA has its mind made up that this is what is going to happen. They are only paying lip service in public. It is a total watse of time. We are a dying industry of advisers and the costs plus RDR will drive all but the very few out of business over the next few years.

  3. Seems like being consulted on the angle you would prefer your head on the block…

  4. Exasperated Me 27th July 2012 at 5:44 pm

    FSA: Dear IFA, what do you think of this?

    IFA: Bagosh*te!!!

    FSA: We didn’t want to hear that so we will pretend you didn’t respond.

    IFA: FOFF, won’t bother in future.

  5. not in FSA run brewery could a boozeup

  6. Julian Stevens 27th July 2012 at 8:12 pm

    Okay FSA:-

    Q: As the “open and transparent regulator” you claim on your website to be, why won’t you publish for all to see and to debate in open forum the responses submitted thus far (and all those following)?

    A: Because steamrollering through your redress scheme as planned, regardless of what anybody else may think or say, would prove what a total sham your consultations really are.

  7. With QCA level 4 the average education standard is there any wonder the responses are poor ?

    Are Foot Anstey responding ?

    Will they mention the doubling of renewal commission and the offer by Cru IM to buy firms if they sold their product ? Thought not.

  8. My thoughts are that I don’t like the idea of paying for others mistakes! Be they Banks, Direct Sales or IFA’s.

    How are all these levies & costs actually calculated – when I receive a bill from a mechanic, builder or electrician it is broken down into component parts – if these levies are fair what have they got to hide?

    Also does anyone know what happens to all the monies from fines?

  9. To Rob ~ Fines used to applied to offset the FSA’s total levy bill but, under the government’s latest proposals, they’ll now go to the Treasury, which is somewhat glaringly at odds with the FSA’s claim (backed up by SkidMark Hoban) to be independent from the government. It’s all just lies and obfuscation.

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