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MPs set to grill Capita and FCA over Connaught

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.

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. Soren Lorenson 16th May 2014 at 11:19 am

    This could be an enjoyable afternoons viewing providing MP’s don’t allow the ‘It wasn’t us it was the FSA’ excuse from the FCA. Hopefully MP’s are smart enough to realise that this is one and the same organisation, bar one single letter.

  2. Julian Stevens 18th May 2014 at 1:22 pm

    Unless and until INDIVIDUALS within the FSA are held accountable (exactly what the FSA itself was proposing as far as senior managers of the organisations it and now the FCA regulated/es) nothing of any value will come of this investigation. When Hector Sants was pressed by the TSC back in March 2011 to name names, he just played hopscotch on the issue, describing the FSA’s failures as having been “collective”, not least because if names were named, his would have had to be amongst them. How could it be otherwise? And still, unlike Fred Goodwin, he keeps his knighthood.

    Now, as suggested above, the FCA will very probably use the predictable deflection tactic of blaming it on the last lot, nothing to do with us, despite the fact that the FCA employs many former FSA people. All that’s changed are the name and a few faces at the top.

    Even if MP’s refuse to accept that tactic, what can they do about it? Nothing more than the TSC can actually do about anything. There’ll be a bit of frowning, tut-tutting and finger-wagging but ultimately it’ll all come to nothing because the FCA, like the FSA before it and all its personnel, enjoy not only statutory immunity from prosecution but immunity from any accountability whatsoever.

    Even if Parliament should realise that the FCA is, in practice, not actually much more effective at averting the really big motorway pile-ups than it was in its previous incarnation, about its only option would be to admit what everybody already knows, namely that the scrapping of the FSA was little more than a cosmetic rebranding exercise that hasn’t achieved the fundamental and significant change of culture that was clearly required. And, after such a short period, Parliament can hardly order yet another scrap and rebuild exercise. Martin Wheatley would surely plead clemency on the grounds that it’s hardly reasonable for Parliament to expect him in less than two years to have plotted and put into effect a completely new course for such a gigantic aircraft carrier as the FSA. To a limited extent, that may be true but, on the other hand, the pace of change and improvement clearly needs to be stepped up, and on terms other than those decided upon by the FCA itself.

    Parliament needs a new body with unassailable powers to kick butt, both institutionally and individually. So when, for example, Martin Wheatley tries to do another Hector Sants by refusing repeatedly to name names, the Committee will have the power to hold him in contempt and punish him accordingly by way of a fine or even dismissal from office for “failing to deal with it in an open and cooperative manner”. Isn’t that exactly what Martin Wheatley did when it was put to him that the FCA ought to reimburse intermediaries for the £118m we were overcharged by the FSA? He just stuck up two fingers to Andrew Tyrie, said No and that was that.

    And finally (for now), just what is APFA trying to get done to address and correct this patently unsatisfactory state of affairs? Holding meetings, publishing articles and occasionally writing to the regulator “calling on” it to do the right thing, such calls being routinely ignored or just casually brushed aside. Just what, of any meaningful value, are APFA members getting in return for their subscriptions? Meetings don’t get things changed. Articles don’t get things changed. Letters to the regulator don’t get things changed. How can APFA not see these things and realise that TO GET RESULTS it needs to adopt a fundamentally new and different strategy?

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