A proposed legal action against Capita Financial Managers for its failures in supervising the Arch cru funds has won the backing of influential MPs including George Galloway and Anne Begg.
Trade body IFA Centre held a briefing with MPs, advisers and investors last night at the House of Commons into the collapse of Arch cru funds. The fallout from Arch cru has seen up to 20,000 investors lose out after the £391m fund range was suspended in March 2009.
IFA Centre began compiling a legal case against Capita Financial Managers in March on behalf of Arch Cru investors who are not covered by the FSA’s consumer redress scheme.
At last night’s briefing, Respect Party MP for Bradford West George Galloway, who chaired the meeting, said: “I know injustice when I see it, and this to me seems like an obvious injustice.
“Capita has not lived up to its responsibilities on this, and neither did the FSA. In my view Parliament must now force them to live up to those responsibilities.”
MP for North West Norfolk Henry Bellingham said the complex construction of the Arch cru funds “certainly amounts to recklessness and is tantamount to fraud”.
Anne Begg, MP for Aberdeen South, told of an adviser in her consistency who recommended clients invest in Arch cru. She said: “The adviser is furious as he is now being told he should have been selling this as a risky product, but the FSA was only saying it was risky after the event. He thinks the FSA should have put out a written warning if there was a problem with this particular fund.
“The regulator is expecting IFAs, who do not have the resource it has, to spot something they themselves were not able to spot.”
But in a surprise move, MP for Hexham Guy Opperman, the secretary of the Arch cru all-party parliamentary group, warned investors they may be better off accepting compensation from Capita under the £54m payment agreed with the FSA in June 2011.
Opperman warned the IFA Centre’s legal battle hinges on whether Capita Financial Manager’s parent company Capita Group would accept legal responsibility over what went wrong.
He said: “If you are able to pull this off you will have the thanks of everyone here. But the legal reality, certainly of everybody that we have consulted thus far, is that it is that minute, smaller part of Capita, which is a totally responsible for these investments and the management.”
Opperman said he did not want to diminish IFA Centre’s efforts, but also did not want to get investors’ hopes up “unduly”.
He said: “I can assure you there is no way the FSA or any Government would have necessarily taken a discounted sum when another amount was a realistic possibility, and unless they had very strong advice themselves.
“The vast majority of evidence shows most of these cases when they go to litigation take a minimum of three years and a maximum of between five and 10 years. That is the choice people are facing. The decision comes down to the lesser bird in the hand and the prospect of a larger offer.”
In response Galloway said: “Guy implies the FSA did this deal with Capita on the basis that there would be a struggle to get more money for investors. I, as a more sceptical type think the FSA was toothless, gutless and was not prepared to take on a bigger financial organisation.”
IFA Centre managing director Gill Cardy says: “The solicitors would have told us by now if we did not have a snowball’s chance in hell with this case, that there was no prospect of success, no nothing. There is a huge amount of time and money that has gone into this. I simply do not accept that would have happened and that we would have taken all these steps in putting the case together if there was no chance of success.”