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Arch cru £54m compensation deal could face judicial review

Pressure group Justice in Financial Services has applied for a judicial review of the FSA’s £54m compensation package for Arch cru investors.

Campaigns director Joe Egerton says the compensation should be worth about £200m.

In June, the FSA, Capita Financial Managers, BNY Mellon Trust & Depository and HSBC all agreed the £54m compensation fund, which will be used to make payments to eligible investors in the CF Arch cru funds.

JFS filed its claim, prepared by QC Anthony Speaight and made on behalf of an IFA who recommended the funds, with the administrative court last week.

It suggests the FSA was wrong to restrict the jurisdiction of the Financial Ombudsman Service as part of the package by artificially capping possible redress payments. Investors taking claims to the FOS will be restricted to receiving payouts in line with the £54m compensation deal.

Egerton says if immediate permission is given for the review it could be completed by Christmas but a deferral could delay it by a year.

JFS says Morgan Grenfell Asset Management funds encountered similar problems to Arch cru in 1996. Regulator at the time, the Investment Management Regulatory Organisation, forced Deutsche Bank, which had the same role as Capita has in the Arch cru funds, to pay £210m to investors within months.

Egerton says: “£200m, which includes the distributions already made, is a good ball-park figure, considering almost £400m was invested in the fund range.

“MGAM and Deutsche Bank had to compensate all the investors by buying back their holdings while CF Arch cru investors will have to wait years to receive back any balance.”

Both the FSA and Capita declined to comment.

The FSA has had the power to restrict FOS jurisdiction for some time. For example, the FOS was restricted during the pension review in what it could consider.


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