View more on these topics

FOS backs Arch cru case against IFA

The Financial Ombudsman Service has provisionally upheld a complaint against an IFA who recommended clients to invest in Arch cru and ordered the adviser to pay redress.

The FOS also warns the IFA will become liable for redress due to be paid under the FSA-agreed £54m compensation package if this is withdrawn before December 31, 2012. The compensation scheme is being challenged through judicial reviews brought by Justice in Financial Services and Regulatory Legal.

The case represents the first provisional decision against an IFA over Arch cru by the FOS.

The IFA, who has not been named, has been ordered to pay redress based on the clients’ original £8,000 investment plus interest, less any withdrawals or distributions already paid. The amount the clients can get from the compensation scheme will then be deducted to give the total redress amount.

The clients, who are only identified as Ms P and Mr M, sought investment advice from the IFA in February 2008. They held about £50,000 in various savings accounts and were hoping for better returns than those available on their deposit account. They invested £4,000 each into the CF Arch cru investment portfolio fund.

The clients referred the case to the FOS after complaining to their IFA when the fund range was suspended in March 2009.

The IFA argued the investment accounted for 17 per cent of the overall portfolio with the rest held in cash, that the funds had been incorrectly valued and that it trusted Capita Financial Managers to do its job as authorised corporate director of the funds.

In his provisional decision, principal ombudsman Tony Boorman says: “I am satisfied this recommendation exposed the consumers to significant risk and not one which their circumstances suggest they were willing to take.”

Paladin Financial Services managing director Tim Purdon says: “The IFA is responsible for recommending the product. By the same token, it is a product that should never have reached the marketplace. If the FSA cannot intercept such questionable investments, how can they expect an IFA to conduct due diligence?”



Social media site is planned for advisers and clients

Former Lighthouse IT director Eddie George is setting up a web and mobile technology firm for the retail financial services industry, along with a social media website for advisers and their clients. The technology firm, Stripped Finance, is due to launch in the first half of 2012. George is currently developing an iPad application along […]


FSA appoints FOS chairman

The FSA has appointed Sir Nicholas Montagu as the new chairman of the Financial Ombudsman Service. Montagu (pictured) is currently the chairman of the Aviva UK Life with-profits committee, a director of the pension corporation and is a former chairman of the board of Inland Revenue. FSA chairman Lord Turner says: “Sir Nicholas Montagu has […]

CML says quality won’t be in danger

The Council of Mortgage Lenders says the mortgage indemnity scheme will not compromise the quality of lenders’ mortgage books. Housebuilders and the Government will absorb 3.5 per cent and 5.5 per cent of any losses respectively if the borrower, who must put down a 5 per cent deposit, defaults and the house price has fallen. […]


News and expert analysis straight to your inbox

Sign up


There is one comment at the moment, we would love to hear your opinion too.

  1. MARGARET PICKERING 25th November 2011 at 11:57 am

    Our IFA closed down this area of his business once he realised things were going pear-shaped. A new advisor has bought the business. We don’t stand a chance do we? Meeting arranged with our MP so we shall see what she says.

Leave a comment