Rockingham Independent clients who invested in a troubled Luxembourg-based life settlement vehicle will not receive compensation for their losses from the Financial Services Compensation Scheme.
ARM Asset Backed Securities issued bonds based on life settlement policies without the appropriate permissions which were sold to investors in the UK and Europe. The UK distributor of ARM products was Catalyst Investment Group which sold the bonds via a number of IFAs, including Rockingham.
Out of the 2,000 UK investors that invested a total of £75m into ARM, at least 200 sales were advised by Rockingham.
Rockingham was placed into liquidation on 30 March. In August the FSCS said it was investigating whether it had a role to play in compensating Rockingham clients, and declared Rockingham in default in November. As ARM is not authorised by the FSA investors are not covered by the FSCS, but can still bring claims against the adviser who recommended the bonds.
In an update for Rockingham customers published today, the FSCS says it is unable to uphold claims in relation to ARM investments.
The FSCS says in order for it to pay compensation, it must be satisfied a claimant would have been likely to win a court case against Rockingham if it was still trading.
The FSCS says: “Whilst we accept Rockingham may potentially have given bad investment advice to some investors in respect of ARM investments, we do not consider such advice can properly be said to have caused the losses which investors may have suffered.”
It goes on to explain that it believes the legal cause of investor losses was not inappropriate advice but the decision of the Luxembourg regulator to reject ARM’s application for authorisation, which Rockingham was not legally responsible for warning investors about.
The FSCS adds: “For these reasons, the FSCS believes Rockingham does not owe a civil liability to investors and accordingly we are unable to uphold claims.”
The FSA fined Rockingham £35,000 in September 2011 and imposed partial bans on its directors over sales of ARM bonds and unregulated collective investment schemes.
Rockingham tended to recommend investment in its retirement income tri-investment product, known as Rita, which was a 10 year annuity wrapped in a Sipp. The ARM bond was one of Rita’s underlying investments.