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Complaints Commissioner rejects FSA complaint over £15k Catalyst loss

The Complaints Commissioner has rejected a complaint against the former Financial Services Authority from an investor who claims to have lost £15,700 as a result of the collapse of Catalyst.

The investor says their loss is a result of the FSA having labelled life settlement funds “high-risk, toxic products” in December 2011.

In a decision published last week, the commissioner said the complaint cannot be considered under the rules of the complaints scheme because it relates to the regulator’s legislative functions.

In October 2013, the FCA censured Catalyst Investment Group for “recklessly misleading” investors when promoting bonds issued by Luxembourg-based life settlement vehicle ARM Asset Backed Securities.

Catalyst was the UK marketing and distribution agent for ARM and offered bonds issued by ARM to UK advisers, who in turn sold them to retail investors. 

The bonds, which were backed by life settlement policies, were sold to investors in the UK and Europe without ARM having the appropriate permissions.

The investor complained that the FSA’s announcement on life settlement funds in 2011 was “premature, inaccurate and prejudicial” and led to a high volume of redemption
requests which resulted in the ARM funds being suspended.

Complaints Commissioner Antony Townsend says the FSA’s 2011 statement was “a matter of judgement for the regulator in making a difficult decision on how best to fulfil
its statutory duties” in preventing the potential misselling of traded life policies.

He adds that the ARM bonds should not have been marketed in the UK and he does not believe the regulator’s actions in 2011 were the cause of Catalyst’s collapse.

Also last week, the commissioner published two other rejected complaints against the regulator.

One complaint was from an investor who claimed the actions of the Financial Ombudsman Service, together with the actions of their stockbroker, caused them to lose their life savings. The commissioner says complaints about the FOS are excluded from its remit.

The second complaint was made by an investor who said the FCA failed to take action against a bank for its “misleading” terms and conditions for an investment bond. Townsend says there is no evidence to suggest the FCA failed to meet its statutory duty.

Adviser views


Tom Kean, director, Thameside Financial Planning

I have little faith in the Complaints Commissioner being truly independent. The regulator’s “toxic” statement on life settlement funds is just one example of it meddling in markets in the name of consumer protection but actually having the opposite effect.


Peter Chadborn, director, Plan Money

From an industry perspective, it is welcome when the regulator takes action early on so while I understand the complainant’s perspective, the FSA was trying to do the right thing with its 2011 statement. 


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