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 week 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 week’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”.
MP for Aberdeen South Anne Begg said: “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 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.”