MPs will look to question the FCA and Capita over their respective roles in the failures of the suspended Connaught Asset Management funds.
A letter sent by MP Alun Cairns, seen by Fundweb, claims there are questions over Capita’s role in the funds. Cairns formed an all-party parliamentary group to address the Connaught debacle.
All three of the Connaught funds were suspended in 2012 with investors losing in excess of £100m as a result.
Cairns said MPs would be requesting information from Capita about its role as authorised corporate director of the Connaught funds, and what it knew about the funds when transferring its responsibilities in 2009.
This follows a debate held with Treasury economic secretary Andrea Leadsom last week.
Cairns says: “The Minister did not state whether a restitution order [requirement to see if redress is payable] was being considered against Capita, but did want to stress they were considering all different avenues by which those who have suffered could obtain compensation.
”In addition, the Minister did not comment on the allegation that Capita issued an information memorandum that consumers believe to be inaccurate, as the fund did not operate as it said it would. It is important this issue is pursued but any specific allegations of fraud are not encouraged, as this may have negative consequences for any current and ongoing legal action.”
He added if Capita did not provide sufficient information it could be called to answer questions in front of the Treasury select committee although this would be some way down the line.
Capita had been the operator of the Connaught Series 1 fund until it was replaced by Blue Gate in September 2009. This followed a failed attempt to transfer the ACD responsibilities to a firm called Mourant in August 2009.
MPs also want to know what action FCA predecessor the FSA took when former Tiuta chief executive George Patellis raised concerns about the fund in 2011.
MPs will now look to find out:
- Why did Mourant not complete the transfer of responsibilities from Capita in August 2009?
- What Capita knew when they handed over responsibility to Blue Gate and their responsibilities towards investors?
- What responsibility did Blue Gate have towards investors and what action did they take?
- Seek clarification on the potential for a restitution order against Capita.
The Connaught Series 1 fund was suspended in March 2012 and interest payments were not made to investors. A review was commissioned to ascertain its true value.
In 2012, Money Marketing revealed investors faced losses of up to 50 per cent. An independent review by Duff and Phelps suggested recoveries would be between £46.5 and £53.2m of the £105.5m used to fund Tiuta.
A decision to wind down the Series 1 and £18m Series 2 fund, which was used to fund another Tiuta subsidiary called Tiuta Development Finance, was made in June 2012. A Series 3 fund, which was not linked to Tiuta loans and raised around £22m, was wound down in July 2012 due to a spike in redemptions.
CAM bought Tiuta International and Tiuta Development Finance, the Tiuta Plc subsidiaries that used the Series 1 and Series 2 funds respectively, for £1 in June 2012. In July 2012, Money Marketing revealed Tiuta International had been placed into administration by CAM.