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FSCS to decide on further NDFA, DRL and Arc compensation by September

Investors in capital at risk products from NDF Administration, Defined Returns Limited (DRL) and Arc Capital and Income will be told whether they will receive compensation “before the end of September”.

The structured product investors will get a Financial Services Compensation Scheme decision more than nine months after the groups failed due to exposure to the collapse of Lehman Brothers.

The FSCS announced a £22m levy on intermediaries in March to cover losses from certain other products from NDFA, DRL and Arc. This was in addition to the £58m levy charged to cover client losses from the Keydata collapse.

An FSCS statement on the capital at risk products says: “These investigations have been necessary for us to determine whether there are likely to be any bases on which we will be able to accept claims from investors.

“This has been a lengthy and particularly complicated process involving an analysis of the information included in the fund brochures along with a review of other relevant company records.

“We now expect to be able to confirm our position before the end of September, and thank investors for their continued patience.”

The affected products are…

NDF – Fixed Income or Growth Plan February 2008

NDF – Fixed Income Plan June 2008

DRL – Kick Out Performance Plan Issue 1

Arc – Fixed Income Plan 6

Arc – Stepped Kick Out Plan 5



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There are 4 comments at the moment, we would love to hear your opinion too.

  1. By September thousands of ordinary UK savers will have been waiting two years since the collapse of Lehman.

    FSCS started looking at this issue last October when the three product providers collapsed. They decided six weeks later that 10 Lehman-backed products (covering about one third of the Lehman investors) woud be eligible for the compensation scheme.

    Members of the Lehman investors action group have been pressing FSCS for an answer on the remaining 5 products for almost a year, only to be told that is is complicated.

    If FSCS decides in September that these products are eligible, this will just be the start of another journey. Each individual will then have to make their own case for compensation. It could take months.

    The funny thing is that FSCS has been set a new target of 7 days to compensate bank-collapse victims – starting next year.

  2. I think the only complexity for the FSCS is their attempts to find reasons not to pay compensation.
    All the NDFA products failed for the same reason -there was no difference in the risk as explained in the Capital Secure and Capital at Risk product literature.
    The FSCS now appear to have been trawling fund brochures to find excuses not to pay.
    It should be noted that these fund brochures were available to NDFA and other Product Providers; but not readily available to the novice investors to whom the majority of these products were sold.
    It now also appears that where mis-selling by IFA’s has been proven that the FSA has not been seen to have taken any action against either compaies or individual IFA’s.
    Having made checks there seems to be no record of disiplinary action against these companies or individuals who are free to carry on as they wish.

  3. one small correct to the previous comment (anonymous): it was quite widely reported last Feb that the IFA RSM Tenon was fined 700k for their part in Lehman-related sales. Also there are many IFA complaint cases still with the Financial Ombudsman which may eventually result in IFAs being forced to compensate victims. Some IFAs have already done the decent thing and made ex-gratia payments. Other IFAs are in for a difficult time if they find that their PI insurance doesnt cover structured products.

  4. It is true that a couple of larger organisations have been fined for their part in the sale of Lehman backed products. However, there are a considerable number of IFA’s who have had total non-compliant declarations made against them by the FOS who have had no apparent action taken against them by the FSA.

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