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Only 12% of Arch cru sales based on suitable advice

The FSA says just 12 per cent of Arch cru sales were found to involve suitable advice, based on an external file review of a small number of cases.

The regulator published a consultation paper today on plans to implement a £110m redress scheme for between 15,000 and 20,000 Arch cru investors.

Firms will be required to assess whether recommendations to invest in Arch cru were suitable, and if not, pay redress.

The FSA is looking to impose the redress scheme based on the results of an external file review designed by an external statistician.

The regulator says it has identified 795 firms it believes sold Arch cru funds.

A sample of 24 firms was drawn from the total, with 179 files reviewed from those firms to assess the suitability of the advice given.

The results showed 12 per cent, or 22 sales, of the files reviewed were found to be suitable. A further 10 per cent, or 17 sales, were rated as unclear, while in 78 per cent of cases, or 140 sales, the advice was found to be unsuitable.

Of the 24 firms reviewed, 20 were found to have missold in at least a third of their reviewed sales. 19 had missold in at least half of their reviewed sales and 14 firms did not have any sales reviewed as suitable.

Of the 22 sales that were deemed suitable, 14 of these came from two firms.

Many sales were rated unsuitable due to a mismatch between the risk the client was willing and able to take and the risks posed by the Arch cru funds.

Firms did not clearly disclose the nature of the underlying assets, or that the assets posed a greater risk than mainstream assets. Firms also did not provide a balanced description of risks.

The FSA says: “We believe the file review exercise clearly demonstrates a high level of unsuitable advice and inadequate disclosure by the firms reviewed, as well as a lack of apparent due diligence conducted into the Arch cru funds.”



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There are 3 comments at the moment, we would love to hear your opinion too.

  1. So an assessment of 3% of files allows the FSA to make this sweeping statement.

    Back in 1994 FIMBRA gave a selection of pension transfer files to the SIB which was seized on as evidence of endemic mis-selling – which it wasn’t.

    This then opened the floodgates to the first mis-selling reviews which, subsequently, proved to be the wedge that enabled the current population of claims management parasites to emerge from under their damp stones.

  2. The simple answer to this problem of mis selling is surely to sell nothing and just charge a fee for doing so.

    Surely that is what RDR is about isn’t it? (lol if you must but you could not make this tripe up, it has got to be the product of a serious number of disordered minds)

  3. Julian Stevens 1st May 2012 at 10:25 am

    If our network was able to determine ArchCru’s products as being unsafe for its members to recommend then why, with its vastly greater resources, wasn’t the FSA able to do so? Too busy concentrating its regulatory firepower on other matters of arguably lesser importance perhaps?

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