The FCA has won its long-running legal battle against the fund manager behind the collapsed Arch cru range, paving the way to a ban and fine against the directors totalling £850,000.
The legal challenge began back in December 2012 under the FSA when decision notices were issued against Arch Financial Products chief executive Robin Farrell and compliance officer Robert Addison.
At the time the FSA said it would have fined Arch FP £9m, but the firm did not have sufficient resources.
The parties referred their case to the Upper Tribunal, which was heard in May.
The FCA’s case centred on four transactions between Arch FP and the Guernsey-listed cell companies that made up the Arch cru funds.
In one transaction, the cells invested in the parent company of Arch FP, in which Farrell was a major shareholder.
Addison and Farrell presented the business plan to the cell directors and Farrell was involved in valuing the parent company for the transaction.
In another transaction, a number of the cells provided a £20m loan to a firm – of which Farrell was a director – to enable it to make an acquisition. Arch FP took a £3m fee for arranging the transaction which the FCA says was not properly disclosed to the Guernsey cell directors.
In his judgment, published yesterday, Judge Timothy Herrington backed a public censure of Arch FP, and a ban on Farrell and Addision working in financial services.
He also supported a fine against Farrell of £650,000, and a fine against Addison of £200,000.
In his ruling, Judge Herrington says: “We have found serious failings to act with integrity on the part of Mr Farrell and Mr Addison. The Authority’s guidance and previous cases in this Tribunal leads to the inevitable conclusion that in those circumstances Mr Farrell and Mr Addison can no longer be regarded as fit and proper persons.”
In a statement, Arch FP says: “Naturally we are very disappointed with the Tribunal’s decision on conflicts but have been vindicated on liquidity management and prudent spread of risk.
“The findings are regrettable but show that Arch was not responsible for the investor losses resulting from the March 2009 suspensions. The FCA and Capita mishandled the situation at an extremely sensitive time for the funds.”