The Financial Ombudsman Service has upheld a complaint about advice to invest in ARM Asset Backed Securities despite the FCA ruling promotional material was misleading.
Luxembourg-based life settlement vehicle ARM sold bonds backed by life settlement policies to investors in the UK and Europe without the appropriate permissions.
In October the FCA censured Catalyst Investment Group, the marketing and distribution agent for ARM, for misleading investors when promoting the bonds.
A former client of PQR Financial Planning complained to the FOS after investing £50,000 in an ARM bond in 2006 sold to him as ‘low risk’.
PQR cited the FCA censure against Catalyst and argued the investment represented less than 10 per cent of the client’s Sipp.
But ombudsman Adrian Hudson said: “Given only what was known (or should have been known) to PQR at the time, I do not consider these to have been appropriate holdings for ‘low risk’ investors. The fund was based offshore and the actuarial model used was opaque.”
PQR must pay the difference between the bond’s value and the value it would have held had it been invested in fixed rate bonds.
In the last year, the FOS has also rejected several complaints against Standard Life from investors who claimed the firm should not have allowed their Sipp to invest in ARM bonds.
Following the default of Catalyst, the Financial Services Compensation Scheme said it will consider ARM claims against Catalyst in the first instance, before reviewing claims against advisers. Last week the FSCS said the processing of Catalyst claims had been delayed.
Jacksons Wealth Management managing director Pete Matthew says: “Advisers should not take all the blame, but they cannot rely on providers’ materials without question.”
PQR declined to comment.