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FSA brings 3 enforcement cases against Arch Financial

FSA Letters 480

The FSA is pursuing three separate enforcement cases against Arch Financial, the fund manager behind the collapsed Arch cru range, Arch chief executive Robin Farrell and Arch head of fund platforms Robert Addison.

All three parties have referred their case to the Upper Tribunal, though no hearing date has been set at this stage.

No details have been made public about the nature of the cases against Arch. The FSA declined to comment.

Farrell says: “We fundamentally disagree with the FSA’s approach in this matter and this is why the cases have been referred to the Upper Tribunal.”

Arch is already facing three legal actions claiming a total of £330m brought by the board of Guernsey-listed cell companies that make up the Arch cru funds. The board has brought claims for damages over the way fund range was managed by Arch, claims that Arch breached its investment mandate, and failed to account for “substantial secret profits”.

An initial £150m claim was brought by the Guernsey cells in January, followed by a second £20m claim against Farrell in April, and then a third £160m claim in July against former Arch directors Addison, Neal Meader and Peter Radford, and former administrators Bordeaux Services.

The claims are being contested by Arch.

The Arch cru range was suspended in March 2009. The FSA agreed a £54m payment scheme in June 2011 between Capita, BNY Mellon Trust & Depositary and HSBC to compensate Arch cru investors. The deadline for Arch cru investors to accept a settlement offer under the payment scheme was pushed back last month until 31 December, 2013.

The regulator is consulting on a separate £110m consumer redress scheme for investors that were missold Arch cru by their adviser, which has been met with fierce industry opposition. The FSA is expected to put out a policy statement shortly if the Arch cru redress scheme is approved.

Equilibrium Asset Management investment manager Mike Deverell says: “There have been suggestions that Arch did not not manage the funds according to what it said it would do. If that is what happened, then clearly it has a case to answer. But where it is quite clear cut is that the marketing of the funds as a cautious managed was not right.”


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There are 5 comments at the moment, we would love to hear your opinion too.

  1. Well it has only taken them 3 1/2 years to finally act against Arch Financial. Does anybody have any details of what each of these actions is for? Surely it is wrong for them to impose a re-dress scheme on advisers to compensate clients when they are only just taking action against the real culprits. Arch Financial would have had to have a Compliant PI POlicy in place to operate. If these cases against them are proved surely this would provide the compensation for clients?

  2. @Simon, The FSA will have spent some time dealing with these enforcment cases. It is quite possible they were working on the cases whilst they were also consulting on a S404 collective redress scheme. I suspect that the cover from the PI policy at Arch is less than the loss that has been created in the funds hence IFA’s were put in the firing line.
    It will be interesting to see how things develop from here because Arch were appointed by Capita,

  3. Gillian Cardy @ IFA Centre 14th November 2012 at 4:19 pm

    The more that it is noticed that the whole range of authorised individuals have failed to comply with their regulatory obligations the more we can hope it is understood that the IFAs were not the principal culprits – and finding the heart of the problem hopefully means that the whole of the IFA sector (including all those who went nowhere near Arch cru) is protected from the storm ahead.

  4. Speaking of Culprits – extract from a FOS letter to a CF Arch Cru investor.
    Your complaint about Arch Financial Products LLP (“Arch”)
    Thank you for your time today. As I told you, I am the adjudicator at the Financial Ombudsman Service. My job is to give you my opinion on whether there is anything we can do to help with your complaint.
    your complaint to us is, essentially, that Arch mismanaged the Arch cru funds Unfortunately there is nothing we can do to help you with that. The reason for this is: Arch managed the Arch cru funds on Capita’s behalf
    So any complaint about what Arch Financial Products LLP did would need to be made to Capita Financial Managers Ltd. The ombudsman can only look at complaints about a firm if they are made by customers of the firm. Arch’s customer was Capita. It had a contract to provide fund management services for Capita. But Capita was the firm that, as authorised corporate director of the Arch cru funds, then offered these services to customers like you.
    However I would not suggest that you make a complaint about Capita because, as you may be aware:
    there is an FSA payment scheme that covers complaints about Capita
    We cannot get you more compensation from Capita than you are already entitled to from that scheme. This is because the FSA announced that the Financial Ombudsman Service would have to follow the rules of the scheme when assessing complaints against Capita about the CF Arch Cru funds. The FSA announcement can be found here:
    http://w' 1 Icf_arch_cru.shtml The relevant bit is:
    We amended the regulatory permissions of CFM [Capita]… on 31 August 2011, so the Financial Ombudsman Service has to follow the rules of the payment scheme when assessing complaints against these firms about the CF Arch cru funds.”

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