The Treasury has confirmed police are considering an investigation into the suspended Connaught funds whilst also examining the role advisers played in recommending the investments.
Speaking in a Parliamentary debate, Treasury economic secretary Andrea Leadsom confirmed police were considering an investigation into the losses suffered by investors.
Leadsom said: “I can confirm there are other law enforcement agencies looking into this matter and I will be urging the police to consider this case very carefully. Members have been interested to know whether the police are looking into this and I can confirm that they are.”
Leadsom and Conservative MP Alun Cairns both also questioned the role advisers played in making recommendations on the funds to investors.
Cairns has founded an all-party parliamentary group to represent investors who have lost money through the funds. Cairns has also been heavily involved in bringing parliamentary debates relating to Arch cru investor losses.
Cairns said: “Questions should be asked why unregulated funds were being recommended to investors in the first place, clearly the times where they would be recommended are very limited.”
Leadsom went on to question the role of unregulated collective investment schemes in recommendations to retail clients.
She added that insolvency reports on both Tiuta and the Connaught funds were due in the near future.
An investigation will also take place into whether the FSA failed to protect investors and whether fund administrator Capita failed to flag concerns to investors.
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.
The FCA’s rules on non-mainstream investments prevented firms from marketing unregulated collective investment schemes to retail investors from 1 January this year.