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FCA orders Capita to re-pay investors £66m over Connaught fund collapse

The FCA has ordered Capita Financial Managers to pay up to £66m to investors in the collapsed Connaught Income fund.

In 2015 the FCA started an investigation into CFM after the Connaught Income Series 1 fund, which invested in high risk loans, lost £110m after the fund was suspended in 2012.

Connaught entered administration in September 2012 after the failure of its Income Series 1,2 and 3 funds that provided lines of credit to bridging loan firm Tiuta, which also went into administration that month.

The FCA said Capita did not conduct adequate due diligence on the fund and failed to communicate its processes properly to investors.

The FCA would normally charge a penalty for the failings but decided to only issue a public censure in relation of the firm as this would not have been able to pay it on top of the £66m.

In its results published in September, Capita said it had set aside £37m after the FCA indicated it could fine the company.

FCA executive director of enforcement and market oversight Mark Steward says: “Consumers are entitled to expect that authorised firms will carry out their responsibilities under our principles for businesses with care and diligence.  These responsibilities are paramount and in this instance CFM failed badly.

“The aim of the payment announced today is to return the amount originally invested, placing investors as closely as possible back into the position they would have been in if they had never invested in the fund.”

Investors have already received a distribution of £22m made in the liquidation, as well as interest and other payments, the FCA says.

Payments also include any awards made under the Financial Ombudsman Scheme investors may have received since they invested.

The FCA adds: “We acknowledge this resolution would not have been possible without the co-operation of Capita and CFM. This agreement will provide substantial benefit to all outstanding investors, including those who invested in the fund after CFM resigned as operator.”

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Comments

There are 7 comments at the moment, we would love to hear your opinion too.

  1. What about the investors still stuck in Arch cru funds!

  2. Brilliant, chuffed to bits for the investors but what about the people who carried out this fraud? When will they be brought to justice?

    Serious questions have to be asked here as to why it’s took six years to sort this when a whistle blower reported the fraud back in 2011.
    Also what about the IFA’s put out of business by FOS decisions on Connaught??????

    • Quite so. What about the regulator’s lack of action to prevent or at least minimise the effects of this motorway pile-up? As a direct result of this negligence, the damage to investor confidence in the industry, the promotion and maintenance of which the FCA claims to be one of its central mission objectives, is far worse than it otherwise would have been.

  3. Nicholas Pleasure 10th November 2017 at 10:16 am

    It’s nice to see Capita finally get what should have been coming to them for years. However, Anthony Menghini is completely right, what about the Arch Cru investors and the advisers who paid out on Arch Cru claims despite believing that an ACD like Capita might have been overseeing the funds properly.

  4. This looks like Arch Cru all over again. When are the regulators going to give the red card to Capita and stop them making cautious investors poorer?

  5. As it always should have been, but much, much sooner!!

  6. I echo those comparing the treatment of Capita here to what happened over Arch Cru.
    This is the main reason why I do not recommend any funds that use Capita as an ACD currently – the regulatory risk of them failing in their duty and potentially landing claims at my door is just too high.

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