Blog: Why won't FOS tackle Capita on Arch cru

The Financial Ombudsman Service (FOS) has managed to reach several Final Decisions against IFAs over Arch cru, but why is it stalling on investigating the fund's authorised corporate director, Capita?

Approximately £400m was invested in Arch cru funds between 2006 and 2009 by roughly 20,000 investors.

About 2,500 of these investors are backing a claim that Capita failed in its duty to ensure the fund was accurately priced, and that it allowed the fund to make higher risk investments than its low risk label permitted.

These are serious allegations which, to its credit Capita, by offering all of the investors Financial Ombudsman rights, has accepted it will be investigated over.

Except it seems highly likely it won't.

In correspondence from a FOS adjudicator last month, seen by IFAonline, it seems the Ombudsman service is going to seek to use its discretion under FSA Complaints Sourcebook DISP rule 3 to avoid dealing with complaints against Capita.

DISP 3.3.4 states "the Ombudsman may dismiss a complaint without considering its merits if he considers... (17) there are other compelling reasons why it is inappropriate for the complaint to be dealt with under the Financial Ombudsman Service".

FOS gives the "compelling reason" that the FSA, as well as Capita, is already reviewing consumer detriment issues arising from what has happened with the CF Arch cru funds, "including, no doubt, the management of those funds by Capita".

The FSA started its investigation in 2009 and for two years investors have heard absolutely nothing about its progress, or when it might be concluded.

IFAs now fear investors understandably eager to see the return of their funds will try to take their adviser to the FOS as a quicker route to redress.

Each individual case will have its merits. The point is, FOS has decided it can and will investigate claims against individual IFAs, but not multi-million pound company Capita.

The Ombudsman's reluctance to investigate Capita seems both arbitrary and unfair.

Investors and IFAs have long held this view. But now Members of Parliament are about to wade into the debate.

The FSA and Capita are set to come under fresh scrutiny about Arch cru - as Conservative MP Alun Cairns is about to raise the issue in Parliament.

He represents several constituents caught up in the affair, but told a Sunday newspaper he has received letters from hundreds of other investors after he began looking into the issue.

"It's completely unacceptable, 20,000 investors have waited for two years with no information," Cairns told the newspaper this weekend.

He is expected to say the same thing to the House of Commons.

It is testimony to the failure of financial services' regulatory architecture that investors' hopes are pinned on him raising the matter at all.