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FSA sets up £100m Arch cru consumer redress scheme

The FSA has launched a three-month consultation into establishing a consumer redress scheme to compensate Arch cru investors.

If the scheme is set up all firms which sold Arch cru funds would have to contact clients to let them know if their case falls within the remit of the scheme within four weeks.

Where redress is due, firms would use an FSA online calculator to calculate each payment, which also takes into account how much money investors can claim from the separate £54m compensation scheme which has already been set up.

Investors should receive notification of how much redress is due within six months and receive payment within 28 days of accepting.

The scheme will be the first time the regulator has set up a customer redress scheme using powers which were updated in 2010.

The FSA says the move could pay £110m in redress to between 15,000 and 20,000 consumers. It comes on top of the £54m payment scheme announced last year involving Capita Financial Managers, BNY Mellon and HSBC Bank, with investors put into the position they would have been in if they had not invested in the funds.

The regulator has developed a template that firms would have to follow to determine if sales were unsuitable. The FSA says firms will have to report on the progress of their review. It estimates the cost of the scheme will total £6m to £11m.

FSA director of conduct supervision Clive Adamson says: “We have found significant evidence that investors looking for lower risk investments have thousands in these funds. It is right that these consumers are put back in the position they expected to be in when they took the advice.

“This is the first time that we have used this consumer redress power and it is going to form an important part of our consumer protection tool kit. We will be working hard to reduce the number of large scale failures. But where they do occur it is imperative that we can get redress to consumers who have lost money through misselling as fast as possible


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There are 8 comments at the moment, we would love to hear your opinion too.

  1. Should they do the same for Key Data victims?

    The FSA had more invovement in that one!!!

  2. I can see this pushing hundreds of firms into liquidation – so claims fall back to FSCS – pushing hundreds more into liquidation – and more claims on the FSCS… repeat until retail financial services is extinct.

  3. Done up like kippers and Capita get away virtually scott free!!
    Might as well just pack up.

  4. This is a blatant abuse of power by the FSA, which has a clear conflict of interest in this matter.

    If these funds were higher-risk, why did they not take action against the firm, which marketed them as lower risk?

    In addition, why is the FSA refusing to report on why the failure actually occurred and Capita’s responsibilities as ACD.

    These were funds that were marketed as low risk, were placed in the Cautious Managed sector and won awards from Lipper! Indeed, the share price indicated lower volatility (although Capita removed all such data from the internet following suspension).

    The questions that the FSA should be asking is why did Capita allow Arch to invest outside of its powers (buying second hand oil tankers with 25% of the assets), and why did Capita allow misleading share prices to be published.

    There has been gross failure at a management and regulatory level, and the FSA is blatantly passing the buck onto firms that advised in good faith, based on information approved by Capita.

    Of course advisers have a responsibility to consider products objectively, however, they cannot be mind-readers and if Capita has fallen down on the job, then Capita should be held responsible.

    This should be determined, before the FSA’s ‘witchhunt’ b0egins. It beggars belief that the FSA agreed a £54 million scheme with Capita, which is totally indequate, before it had completed any investigation and then instructed FOS that any complaints against Capita would be limited to the terms of the Scheme.

    If this is not evidence that “absolute power corrupts absolutely”, then I don’t know what is.

  5. Dav id Parkinson 30th April 2012 at 11:01 am

    So the investors who were not invested in the fund as low risk & it only formed small part of their portfolio are still stuffed then?!! This is just a scheme set up to encourage complaints against IFA’s & almost promoted as you must have been mis sold by the FSA. What a stitch up. They must have done lunch with Capita again…
    What I don’t understand is if a client is found in favor of. What are the implications/repracussions on the IFA? Are we back to PI to cover? Seems like one big stitch up.

  6. As an investor in Arch cru, I was absolutely taken in. I remember with clarity the day I decided to turn down investing 25% of my pension in the other cautious managed fund with slightly better returns.

    The research had been thorough by my IFA, they had kicked out several shakier schemes that year, including distressed life policies.

    These were the three phrases that made me invest in Arch cru

    Cautious Managed – IMA
    CF – Arch cru – Capita as ACD
    FSA Approved.

    And nothing else.

    How bad is this for all the honest hardworking IFAs I have met in the course of the Investor campaigns? All the IFAs can do now is launch the noisiest protest campaign since the Save our Woods campaign.

  7. Shout and scream all you like, no one at the other end of this debacle (FSA or FSCS) is listening, they have their specially designed regulatory ear protectors on and nothing any IFA firm or individual says matters.

    Regardless of other circumstances, it is obviously all our fault.

    FSA = Financial Stichup Authority

    Pity any IFA who is looking for a long term future in this industry, in less than 5 yrs, an IFA will be a rare beast indeed.

  8. I have recently asked Capita to send me a list of the assets in which Arch cru was invested so I can check for myself none of them were unlisted. Their prospectus and 6 monthly reports all state quite explicitly that Arch cru was not invested in unlisted securities. Greek Shipping?

    Needless to say I’ve had no response so have refered to FOS. Will be interesting to see if they do anything.

    I would urge everyone to request this list.

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