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Arch cru £54m payment scheme deadline extended by a year

FSA Letters 480

The deadline for Arch cru investors to accept a settlement offer under the £54m payment scheme agreed by Capita, BNY Mellon and HSBC has been pushed back a year until 31 December, 2013.

The firms have agreed today to extend the payment scheme deadline from its previous deadline of 31 December, 2012.

The FSA agreed the payment scheme between Capita, which acted as the authorised corporate director of the Arch cru fund range, and depositaries BNY Mellon and HSBC in June 2011. The FSA estimated at the time the compensation package would return investors an average of 70 per cent of the value of CF Arch cru funds as at March 2009 when the fund range was suspended, alongside distributions already made and remaining assets.

But as at 30 June this year, the latest valuation data available, Capita estimated investors stand to get an average of 62 per cent of the value of the funds.

Capita wrote to Arch cru investors with details of the payment scheme in August, and has sent out individual payment offers under the scheme. Capita has today written to investors advising them of the extended deadline. It says applications submitted after 31 December, 2013 will only be accepted in “exceptional circumstances”.

In its latest investor letter, Capita reiterated to investors the FSA will not be imposing any fine on the company in relation to its role as ACD of the Arch cru funds. The FSA is expected to publish a statement on its findings about Capita’s role in the collapse of Arch cru “as soon as possible”.

The FSA has also proposed a separate £110m consumer redress scheme which will require advisers who recommended Arch cru to review their sales and pay redress where appropriate. A policy statement is expected from the regulator next month if the consumer redress scheme is approved.

A Capita spokeswoman says: “The deadline has been extended to give Arch cru investors more time to decide whether the settlement offer is right for them.”

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Comments

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

  1. So, Capita’s reasons for the extension are that, “The deadline has been extended to give Arch cru investors more time to decide whether the settlement offer is right for them.”

    This beggars belief. Particularly, as investors don’t have a choice – either they accept a disgracefully low payment, or they get nothing. Thanks to the FSA, investors rights to appeal to the FOS for causally-linked compensation have been denied.

    One can only presume that this extension is connected to the FSA’s forthcoming announcement on its proposed Consumer Review; which is looking increasingly unjustified and very unlikely to deliver the £110 million required to avoid the FSA looking incompetent at best, and self-serving at worse.

    The good news is that we are now likely to see the FSA’s long-awaited report on what actually happened, before investors have to make their decision. One can only hope that the FSA will finally require those responsible for the funds’ mispricing to compensate clients, and accept that advisers and PI insurers are not there to underwrite failures of regulation or ACD stewardship.

  2. Do we have any choice ? Is there ANY chance that the Capita offer will be increased ? I think not !!

    It seems to me , all along that there is a very cosy relationship between the ” boys ” in Capita and the ” boys ” in the FSA, and the likelihood of ever discovering what this relationship was slips further away as the FSA metamorphoses into whatever its going to be
    called next.

    Meanwhile we sit here with losses of 70% ? 60%/? 50%/ who knows …. 4 years nearly now … no income, no interest, and our IFA, who took thousands in commissions, who then went bust in order to start again, gets off scot free !!

    More than almost anything to do with this disaster, what we cant understand is that
    given that our IFA had PI Insurance AT THE TIME he gave us the advice, why cant we claim against it ?

  3. To Anonymous @8.55

    The problem is we don’t really know why the Arch Cru funds failed. We do know that the FSA / Capita / HSBC / BNY Mellon all failed in their roles but we are awaiting the full details of what went wrong.

    So unless your IFA was called Mystic Meg, its a bit harsh to blame them when the regulator, the authorised corporate directors and depositors weren’t aware of any problems, how was your IFA supposed to know?

  4. @Anon 08.55

    I have the greatest sympathy for you. Back in the days of the SIB (when we had a regulator with integrity), this mess would have been sorted out within a year, and those responsible would have been required to fully compensate you.

    Instead, we have a regulator who has yet to opine on what actually happened, but prematurely decides to let Capita off with a paltry settlement, while threatening to require advisers to meet the difference.

    So far, this smacks of regulatory incompetence, but what is unforgivable is that the FSA is blatantly refusing to hold the ACD responsible, while prejudging that advisers should carry the can for recommending these ‘high risk’ funds.

    Personally, I didn’t sell these funds, but I can understand why some IFAs did. After all, a (very)basic degree of due diligence in 2008 would have picked up that that the funds were in the ‘Cautious Managed’ sector, had won an award from Lipper and had a very stable price history. None of this would cause an IFA to question the managers’ assertion that these were low risk funds.

    If anyone is to blame, then surely it must be the ACD that signed off the accounts, prepared and published the daily unit price (which we now know was wrong) and did not question the investment decisions of its appointed manager.

    Oh, I forget …. the ACD was Capita and, in the FSA’s eyes, it is bullet-proof.

    This is abuse at the highest level, and investors and IFAs must continue to lobby Parliament and Martin Wheatley if there is to be any hope of justice and fully compensation.

  5. @ Mark Coughlin

    It’s not that the information as to why the funds failed is not known, but that certain parties are dragging their heels.

    It is indisputable that the unit prices disclosed by Capita bore little relation to the actual net value of the funds’ assets, and that the fund managers invested beyond their powers. Following the funds’ suspension, Capita commissioned PwC to investigate and promised to publish the findings. However, on completion, Capita decided against publication. I wonder why.

    As for why the FSA has taken three and a half years to provide any explanation, could it have something to do with the fact that an ARROW visit in November 2009 uncovered serious mispricing issues, but the regulator still went ahead and authorised the final Arch cru fund?

    If this issue was independently judged in Court, liability would rest on ‘causation’ – ie, what actually caused the loss – and the parties responsible would be liable for those losses.

    Instead, the FSA regards due process as little more than an annoying irritation; as it has already decided whom it wishes to carry the can.
    Otherwise, why would it approve the Capita ‘no-blame’ £54 million Payment Scheme, confirm that no action will be taken against Capita, announce a Consumer Review that “will generate £110 million in compensation” from advisers and restrict the FOS’ powers?

    How can this be anything other than an abuse of regulatory powers?

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