The FCA has censured Catalyst Investment Group for “recklessly misleading” investors when promoting bonds issued by Luxembourg-based life settlement vehicle ARM Asset Backed Securities.
Catalyst has been declared in default and is unable to pay the £450,000 fine that would otherwise have been imposed. The firm falls under the Financial Services Compensation Scheme investment adviser sub-class, meaning advisers are likely to be hit with the cost of claims.
The regulator is seeking to ban and fine Catalyst chief executive Timothy Roberts £450,000, and to ban director Andrew Wilkins from senior financial services roles and fine him £100,000. Both men have referred their cases to the Upper Tribunal. Former compliance director Alison Moran has been fined £20,000.
Catalyst was the UK marketing and distribution agent for ARM, offering life settlement-backed bonds to advisers, who sold them to retail investors. A total of £54m of ARM bonds was sold to UK investors without ARM having the appropriate permissions.
The FCA says Catalyst knew ARM had applied for a licence from the Luxembourg regulator the CSSF in July 2009, and had been asked to stop issuing bonds in November 2009 pending a decision.
The final notice reveals in December 2009, Catalyst wrote to advisers stating ARM had applied for authorisation “to offer investors further reassurance in this current climate” and that the process was “in its final stages”.
The FSCS is expecting to receive at least 100 complaints from the Financial Ombudsman Service against Catalyst which centre around the promotional literature for ARM bonds.
While it handles Catalyst claims, FSCS claims against Rockingham Independent, which advised at least 200 UK ARM sales, and claims against other advisers have been postponed.
Jacksons Wealth Management managing director Pete Matthew says: “Any mis-information is to be condemned but if it is reckless mis-information then all the more so. These kind of cases make it more difficult to move towards being perceived as a transparent and professional industry.”