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Topics: Arch cru| FSA| margaret cole
The Financial Services Authority (FSA) has criticised IFAs for trying to shirk responsibility for Arch Cru investors' losses, and has warned evidence of widespread mis-selling could trigger an industry-wide past business review of all recommendations to invest in the fund range.
Speaking yesterday at a closed meeting of 30 MPs on the fairness of the Arch Cru investors redress scheme, Margaret Cole, managing director of the FSA's conduct unit, expressed anger at some advisers' attempts to avoid any accountability to their clients.
She said: "It's not good enough that some IFA firms say that they have no responsibility for investor losses and that some of them seek to distract from their own possible responsibility by demanding that others pay more."
Cole hinted that the FSA is considering carrying out an industry-wide past business review of Arch Cru advice.
"If we find that IFAs are liable for mis-selling Arch cru investments, then we as the regulator have a number of options open to us, including the power to seek an industry wide past business review and redress if we find widespread failure.
"But that is complicated, it requires certain process and will take time to sort out."
Cole dismissed the argument put forward by some advisers that they had advised low-risk investors to put money into Arch Cru because the Investment Management Association categorised the funds as cautious managed.
"[IFAs] have to apply sound professional judgment and be clear that what they are selling is right for this customer. They have to examine and apply their judgment to the promotional materials.
"They should know what the descriptor "cautious managed" means, and know that it's not a risk classification, and make sure the people they are advising don't think it is," she said.
Two judicial reviews - one investor led and the other brought by a group of IFAs - are awaiting decisions at the High Court on whether the £54m payment scheme set up by Capita, HSBC and BNY Mellon can be legally challenged. Cole said the FSA will fight the cases if they go to court.
"We don't believe it is in the interests of investors for the scheme to be struck down. It removes the certainty. Because let's be clear, striking down the payment scheme doesn't mean these three parties will have to pay more. "
She said a recent Financial Ombudsman decision which ruled an IFA gave unsuitable advice to two Arch Cru investors and must now pay redress, less any amount the couple receive from the payment scheme, means advisers are likely to be worse off it either judicial review succeeds.
If the payment scheme is withdrawn the IFA will have to pay the investors the full amount.
"As we can see from the Ombudsman's decision, it's not even in the IFAs' interests for the scheme to be struck down as they could well find themselves picking up a bigger bill if they have given unsuitable advice," she said.
The FSA believes there are about 900 IFAs who recommended Arch Cru investments.
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Good post Chris Clark
Interesting post Chris Clark and just firther confirms that the FSA cannot continue to regulate the way they do. Personally I have no faith in the FSA at all and until they are accountable for their own mistakes I really do not see how they can judge anyone at all. The whole system is wrong, unjust and unfair, but sadly no one really cares as long as they can blame the person or firm at the bottom of the tree.
Posted by: Michael Fallas
One rule for some?
Why aren't the banks being subjected to a full review of the selling of PPI? They were allowed to shirk responsibility for years and even now they are fending of complaints from the few who have the temerity to claim compensation, the vast majority do not bother.
Posted by: Exasperated Me
FSA - Do something decent for a change !!
I have followed the Arch Cru debacle for some time now. It is quite clear to me that the FSA have failed massively in their responsibilities to consumers and to IFAs. Their latest predictable activities "we are going to review the advice of Arch Cru funds" is a sham. Its a cover up for their absolute inadequacy. The financial services industry has to man up to the FSA and force action to get this whole situation dealt with properly. Not just a fudge !! Arch Cru funds were sold on "mis - information" - not only that "mis - information material" that the FSA actually approved . Do the decent thing for a change FSA and make those really responsible for this debacle pay up instead of bullying your way out of things yet again .......or do you have something to hide ?
Posted by: Michael
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When an IFA asked the FSA about the funds, look what they were told...
Reg Legal put out the following press release yesterday morning: We note that the Financial Ombudsman Service has published a decision to uphold a consumer's complaint about an IFA recommendation. The points need some thought and are being analysed at the moment, and we will provide advice shortly. However several points seem to be apparent to us on the surface. This IFA did apparently good research on the funds. The funds then collapsed under the FSA and Capita's nose. Reading through the full report it does rather seem that although the FOS acknowledge the IFA did pretty much everything, FOS found them in non-compliance anyway. But what else could the IFA actually have done in 2008? Well, they might have rung the FSA and asked if the FSA have any concerns about the Arch cru Funds. So perhaps we should ask another question. What would the FSA have told any IFAs ringing up for advice on the Arch cru funds in 2008? The answer from the FSA is still awaited, but submitted to Parliament for today's FSA meeting was the following in their own words from a wronged client: "When our IFA was advising us on the Capita investment he was concerned about the scheme so approached FSA and was told they were quite satisfied how the scheme was being run. We handed over our investment in January and by March the whole scheme was frozen. This begs the question what is your is your connection with Capita as you obviously were not reporting back to our IFA the true position, or monitoring an investment company which was already in trouble." The client has since confirmed today by email, that the FSA advised the client's IFA in December 2008, 2 MONTHS after the FSA ARROW inspection that found problems in the funds.
Posted by: Chris Clark