Some Arch cru investors may get much less than they were expecting from the FSA’s compensation package due to falls before the funds were suspended, leading to fears that IFAs could be forced to pay higher redress.
In June, the FSA agreed a £54m compensation package for Arch cru investors with Capita Financial Managers, BNY Mellon Trust & Depositary and HSBC Bank.
At the time, the regulator said it expected investors to get around 70 per cent of the net asset value of the Arch cru funds when the range was suspended in March 2009 when combined with distributions already made and remaining assets.
Investors can pursue their adviser to recoup the rest of their original investment.
Documents obtained by Regulatory Legal show that between September 17, 2008 and March 12, 2009, the net asset value in the CF Arch cru investment portfolio dropped by 12 per cent from 115.19 to 101.81 while the specialist portfolio fell by 10 per cent from 114.47 to 102.91.
The value of the investment portfolio fell by almost 6 per cent in the two days before the funds’ suspension on March 13 while the specialist portfolio fell by over 4 per cent over the same period.
Authorised corporate director Capita has admitted there is “significant difficulty and uncertainty” in assessing the value of much of the remaining assets held in the funds.
In a provisional decision last month, the Financial Ombudsman Service ordered an IFA to pay redress to Arch cru clients. The adviser will have to pay the original investment plus interest less withdrawals or distributions already paid and any amount received from the compensation package.
Paladin Financial Services managing director Tim Purdon questions why advisers can be pursued for compensation, given the regulatory failings over Arch cru.
He says: “It is the regulator that has the power to ask in-depth questions of fund providers, not IFAs.
“Are we going to reach a stage where all the remaining IFAs are doing is working to pay compensation in respect of advisers who sold these investments and have left the industry?”