Legal experts have questioned the FSA’s decision to force IFAs to pay up to £110m through an Arch cru consumer redress scheme, compared with its treatment of other players in the debacle and recent misselling scandals.
The regulator published a consultation this week on plans to set up a consumer redress scheme for Arch cru investors, the first time such a scheme has been created under new FSA powers granted in 2010.
IFA firms will have to review all cases and pay redress where appropriate. The regulator expects a large number of firms to default as a result, with up to £33m passing to the Financial Services Compensation Scheme. A large proportion of the £124m already due to be paid by investment and pension intermediaries in FSCS levies this year is down to Arch cru.
A law firm representing over 400 Arch cru investors is calling on the FSA to justify how it is apportioning blame for the Arch cru saga between advisers and other parties. Last year, the FSA agreed a £54m compensation scheme, funded by the authorised corporate director Capita and depositories BNY Mellon and HSBC, with all payments in final settlement.
Foot Anstey Solicitors associate Alan Hughes says: “The glaring omission is there is no explanation as to why they were asked to put in £54m and why it is fair and reasonable for IFAs to pay the rest. It looks like the FSA is not prepared to take on the bigger players but is prepared to come down on IFAs like a ton of bricks.”
Aifa policy director Chris Hannant (pictured) says: “The big names that stood behind this seem to be paying a small fraction of the total redress, which does not seem right. At the moment, it looks like redress is falling disproportionately on advisers.”
Compliance consultant Adam Samuel says it is inconsistent for the FSA to apply its consumer redress scheme powers in the Arch cru case but not for other misselling scandals such as PPI. He says: “There will always be a suspicion the involvement of heavily lawyered-up banks explains why such scandals were excluded from this kind of redress scheme.” An FSA spokeswoman says: “This is a complex issue and it involves a lot of different parties. The redress scheme consultation is based on evidence of misselling. We will be publishing a finding in relation to Capita as soon as possible.”