Treasury financial secretary Mark Hoban has rejected calls for an inquiry into the Arch cru scandal and the failures of the FSA and Capita Financial Managers.
There was cross-party support for an inquiry into what went wrong at Arch cru at a parliamentary debate this morning on the £54m Arch cru compensation package agreed by the FSA in June between Capita, BNY Mellon and HSBC Bank.
MP for Rutherglen and Hamilton West Tom Greatrex, who secured the Arch cru debate, said the compensation package appeared to be an “admission of defeat” by the FSA that it could not work out what went wrong and why.
He also led the calls for an investigation into the regulatory failures in not preventing what happened with Arch cru, and into Capita’s role as authorised corporate director of the funds.
But Treasury financial secretary Mark Hoban defended the compensation deal, saying it allows investors to receive a payment by the end of this year rather than having to wait several years for an uncertain outcome.
Hoban said there was a “trade off” to be made, and a decision needed to be taken on whether investors who have lost money invested in Arch cru funds receive money sooner or later.
On whether he would take forward calls for an inquiry, Hoban said: “I am yet to be persuaded that a section 14 inquiry is appropriate. It would certainly not be appropriate to announce one whilst enforcement action is being taken against any party to this.
“It is not the role of the FSA to ensure no firm ever fails, nor is it the role of the FSA to approve the investment strategy of each and every OEIC operating in the UK or to ensure its investments are sound. They are responsibilities that rest elsewhere.”
But Hoban admitted there were lessons to be learned from how the collapse of Arch cru has unfolded.
He said: “It is vital that everyone engaging in this does reflect on the lessons that are learnt from this, that is the regulator, industry players, IFAs, and others. Many issues have emerged from the complexity of the scheme, the need for consumers to have better quality of advice and better financial education. We look very carefully at every lesson learnt from cases like this and it is reflected in our thinking on the FSA.”