The board of the cell companies that make up the Arch cru funds is preparing to launch a multi-million-pound legal claim against Arch Financial Products over its management of the failed range.
SPL Private Finance IC Limited chairman Hugh Aldous says the board and its advisers are preparing a claim against Arch FP, which acted as investment manager to the range, and says a “cascade of claims will follow against those who failed in their duty of care to the cells”.
Up to 20,000 people invested in the CF Arch cru fund range when it was suspended in March 13, 2009. The FSA recently announced a £54m package to compensate investors.
The board of the cell companies that make up the funds says the total sum invested into the cells by shareholders was £422m and that at March 31, 2009, before the market quotation for shares of the cells were suspended, their total net asset value was believed to be £341m.
The market quotation for the cells was suspended on July 27, 2009.
The new board of the cell companies was brought together in December 2009.
Aldous says the claim is now advanced against Arch FP. In the firm’s annual report for the year ended March 2011, he says: “The quantum of that claim is going to be a considerable number of millions and arises from losses to the cells caused by the negligence and wrongdoing of those servicing them.
“Throughout our investigations, we have discovered what we consider to be negligence, lack of diligence, the use of unsuitable counterparties and the making of improper gains by the former managers.
“In our view, the net asset value of several of the cells was overstated from 2007 onwards and the share price of cells were influenced so that they tracked the overstated NAV’s unreasonably.”
The firm says it plans to hand its findings to the Guernsey Financial Services Commission and, through the commission, to the FSA.
An Arch spokesman says: “The ICC has not brought any claim against Arch Financial Products to date. In the event, however, that proceedings are commenced, we will defend any such claim vigorously and, based on the advice we have received to date, we believe that we will be successful.”