Adviser have hit out at the FSA over its decision not to levy a £4m fine against Capita Financial Managers over its failures as authorised corporate director of the Arch cru funds.
The FSA censured Capita Financial Managers this week, saying it could not fund both its contribution to the £54m payment scheme agreed in June 2011 and a financial penalty. Parent company Capita Group contributed £32m to the payment scheme, with depositaries 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. The FSA estimates this scheme could see 30 per cent of advisers who sold Arch cru go bust and lead to £33m falling on the Financial Services Compensation Scheme.
Informed Choice executive director Nick Bamford says: “The FSA cannot possibly let Capita off the hook and expect others who are totally unconnected to Arch cru to pay.”
Association of Professional Financial Advisers policy director Chris Hannant says: “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.”
Former FSA head of retail policy David Severn says: “If imposing a fine meant the contribution made by the ACD to compensating investors would be less, thereby throwing more of the burden on IFAs, then I suppose we have to grudgingly bite the bullet.”
But Severn questions why Capita Financial Manager’s parent company could not have paid towards any penalty levied against it, as it did with the £54m payment scheme.