The FCA plans to investigate Capita Financial Managers and Blue Gate Capital, the operators of the failed Connaught Income Series 1 Fund, after withdrawing from talks with the firms.
The regulator had been supporting negotiations with the aim of securing an agreement between the parties to address losses to investors in the fund.
But in a statement issued today, the FCA says: “The period for the negotiations has been extended more than once as it was considered to be in the interests of investors to do so.
“Due to the level of public interest in the fund, it was decided to make this decision public, but there will be no further comment until investigations reach a conclusion.
“The fact that a firm is under investigation does not mean that the FCA has reached any conclusions on whether any wrongdoing has occurred.”
The Connaught Series 1 fund was suspended in March 2012 and a review was commissioned to ascertain its true value.
In 2012, Money Marketing revealed investors faced losses of up to 50 per cent. An independent review by Duff and Phelps suggested recoveries would be between £46.5m and £53.2m of the £105.5m used to fund Tiuta, a bridging lender.
A decision to wind down the Series 1 and £18m Series 2 fund, which was used to fund another Tiuta subsidiary called Tiuta Development Finance, was made in June 2012. A Series 3 fund, which was not linked to Tiuta loans and raised around £22m, was wound down in July 2012 due to a spike in redemptions.
Connaught Asset Management bought Tiuta International and Tiuta Development Finance, the Tiuta Plc subsidiaries that used the Series 1 and Series 2 funds respectively, for £1 in June 2012. In July 2012, Money Marketing revealed Tiuta International had been placed into administration by CAM.