The Financial Services Compensation Scheme is set to decide whether it will pay £38.3m in compensation to Arch cru investors who have brought 750 claims against their advisers.
In its annual report and accounts for 2011/12, published yesterday, the FSCS says at the year end it had received around 750 claims against 27 different IFAs that recommended Arch cru funds.
The FSCS says it has been difficult to quantify investor losses following the suspension of the Arch cru fund range in March 2009.
When calculating investor losses the FSCS also takes into account any payments from the £54m redress scheme agreed by the FSA with Capita, BNY Mellon Trust and Depositary and HSBC in June 2011.
The FSCS says: “In order to calculate investors’ losses, we take account of the redress scheme and we have established a method of valuation of the funds. We have also reviewed the nature of the funds to be able to assess the relevant risk levels.
“This work was nearing completion at the end of 2011/12 and FSCS expects decisions will commence on claims early in 2012/13.”
The FSA is consulting on whether to establish a separate £110m consumer redress scheme for Arch cru investors. Firms that recommended Arch cru will have to review whether the advice was suitable and if not pay redress.
The report also reveals the FSCS has so far spent £7.9m in pursuing recoveries from Keydata advisers. In 2011/12 the FSCS recovered £30m in relation to Keydata from the industry.
The FSCS says most claims have now been completed with 56 outstanding claims. Claims were accepted from three categories of investors – Keydata bonds backed by SLS Capital, Keydata bonds backed by Lifemark and Keydata tax claims backed by Lifemark.
Keydata Investment Services was declared in default on June 8, 2009.
In total, the FSCS received 96,903 claims in 2011/12, more than double the 39,499 complaints received in 2010/11. The average payout was £4,362 in 2011/12, down from £6,640 the year before.
Claims relating to the misselling of payment protection insurance accounted for 81,005 of the 96,930 complaints received, with the majority of these relating to Welcome Financial Services, which was declared in default in March 2011.
Excluding claims connected to Welcome FS, the FSCS received 29,234 new claims from consumers during 2011/12, 26 per cent less than in 2010/11. Some 13,309 of these claims, 45 per cent, were related to PPI.
In 2011/12, there were 3,767 claims made against life and pensions intermediaries, compared with 4,180 the year before, and the uphold rate was 50 per cent. Investment intermediaries had 6,899 claims made against them, compared with 23,603 the year before, with around 81 per cent upheld, down from 90 per cent the year before. Mortgage brokers had 1,191 claims made against them, up from 357 the year before, and around 5 per cent were upheld, down from 23 per cent the year before.
The FSCS made total compensation payments of £347m in 2011/12, compared to £535m the year before. This, the FSCS says, is because of the gradual decline in new claims related to the major banking failures of 2008/09. Compensation payments made in relation to Welcome accounted for around £41m on the total.
Broken down into sub-classes, investment intermediation accounted for £108m of the total, life and pensions intermediation accounted for £20.6m of the total and home finance intermediation accounted for £0.3m of the total.
The FSCS’s running costs for 2011/12 were £57.2m, excluding the costs associated with Welcome and the major banking failures of 2008/09, compared with a budget of £59m.