ARCH CRU Mis-selling - IFAs to pay up

bigfreddiel

any ifa that mis-sold ARCH CRU investments will be responsible to compensate their clients.

any ifa involved MUST write to their clients by 28th April toown upon mis-selling and then for a claim to be made against them.

clients will be fully compensated plus gaiins

fantastic innit - i guess ifas can afford it tho'

cheers

fj

Aegis

bigfreddiel wrote: »

any ifa that mis-sold ARCH CRU investments will be responsible to compensate their clients.

any ifa involved MUST write to their clients by 28th April toown upon mis-selling and then for a claim to be made against them.

clients will be fully compensated plus gaiins

fantastic innit - i guess ifas can afford it tho'

cheers

fj

The sad thing is that a lot of the IFAs who heavily sold Arch Cru genuinely can't now afford to pay back their clients, and will instead be going into administration. This leaves those clients reliant on the behind-the-scenes deal negotiated on their behalf by the FSA and the FSCS, which of course has a maximum compensation limit.

It's a far from ideal set of circumstances for the clients.

munk

To recap briefly - originally the FSA agreed a £54m payment scheme for all investors affected by the failed CF Arch Cru funds - originally this had to be agreed to by end of 2012 and has since been extended until end of 2013. Later on this redress package (section 404 of the Financial Services Act I think) was agreed whereby anyone who made their investment via an IFA could reclaim losses via the Financial Services Compensation Scheme. This section 404 scheme is due to come into effect today or in the next few days.

The section 404 scheme however doesn't apply to anyone who invested in CF Arch Cru directly. That said, there is some possibility of a legal challenge which anyone who didn't accept the original £54m payment scheme or for whom this new section 404 redress package does not apply can take part in:

http://www.ifalife.com/articles.asp?AID=1494

I thought you and your community members would be interested to see the press release which summarises what IFA Centre is doing at the moment to attempt to ensure justice for Arch cru investors, and the letter that our solicitors prepared for issue to investors who may be interested in joining the action (principally those not served but the s.404 scheme, those whose losses are irrecoverable in full even through the s.404 scheme, and those investors who do not want to opt in to the s.404 scheme as they do not hold their advisers responsible for their losses).

See here for more info / to get involved:

http://www.ifacentre.org.uk/

Essentially the solicitor's need to know in advance that there's a big enough groundswell of interest to start proceedings. Sounds quite tricky though since there's no guarantee of how much anyone who takes part in the action will actually get (ie it could actually be less than the amount offered by the original £54m payment scheme that the FSA let Capita ... get away with... :rolleyes:).

Still, if you're not covered by the section 404 redress scheme and haven't yet accepted the £54m payment scheme, at this stage there's nothing to lose in at least registering your interest (there's no commitment at this stage).

Personally I'd been hoping that the whole mess would be sorted out by now anyway with Capita having to properly repay all investors what they'd invested + interest (given they were responsible for overseeing Arch Cru as the ACD, a role in which they failed miserably by all accounts). Seems quite insane that IFAs are being held responsible [text deleted by MSE Forum Team].

[text deleted by MSE Forum Team]

Re the statement that a lot of IFAs can afford it - apparently there is considerable concern at how many IFAs may go out of business as a result of this, plus something about there being a major issue regarding insurance for advisors (not entirely sure what the deal is but presume it's along the lines of how IFAs may end up having to claim on their insurance to cover costs of repaying customers and so future premiums would not be affordable after that).

dunstonh

Seems quite insane that IFAs are being held responsible for misselling a fund that was itself quite clearly mispackaged/missold by the Arch Cru anyway

In someways it does seem unfair that IFA. However, IFAs are meant to do the due diligence and there were holes in material that could easily be spotted. Undisclosed assets and private equity being the obvious ones. I think the Cru management and Capita got away with it lightly but ultimately, the small number of IFAs that recommended it have to take their share of the responsibility.

It has had a knock on effect with advice today. I outsource part of my research and you can see the research companies being far more cautious before they approve a product or fund.

Re the statement that a lot of IFAs can afford it - apparently there is considerable concern at how many IFAs may go out of business as a result of this

I read that it was around 1000 IFAs that recommended it. The majority were directly regulated. So, its quite possible many will or already have close their doors. However, that still leaves around 20,000.

plus something about there being a major issue regarding insurance for advisors (not entirely sure what the deal is but presume it's along the lines of how IFAs may end up having to claim on their insurance to cover costs of repaying customers and so future premiums would not be affordable after that).

I noticed last year that my PI insurance renewal had questions on whether I had any Arch Cru sales. I hadnt but my understanding was that the PI insurer was effectively refusing to offer renewal cover if you said yes. I suspect those that have recommended may find they get pushed out by the cost of PI insurance or even find they cant get PI insurance (which is a requirement).

Aegis

munk wrote: »

Personally I'd been hoping that the whole mess would be sorted out by now anyway with Capita having to properly repay all investors what they'd invested + interest (given they were responsible for overseeing Arch Cru as the ACD, a role in which they failed miserably by all accounts). Seems quite insane that IFAs are being held responsible [text deleted by MSE Forum Team].

[text deleted by MSE Forum Team].

The trouble is that there's so much blame to go around. [text deleted by MSE Forum Team].

Capita clearly messed up royally by not carrying out their duties as ACD correctly. They didn't check to see that conflicts of interest were managed, they didn't verify any of the valuations, basically they just took their fee and made the fund available to the world.

The IFAs who recommended it really should have known better. Looking at a fund factsheet before advising someone to buy it is a must, and those factsheets very clearly stated that a very large proportion of the holdings were in private equity and private finance. These facts were never glossed over on the factsheets at all [text deleted by MSE Forum Team].

The trouble with blaming the IFAs and making them compensate clients is that it inevitably ends up being the innocent ones who pay the increased fees, because the guilty ones have gone into administration and allowed their claims to fall on the survivors. Crazy system really, punishing the innocent and letting the guilty walk away scot free, often without even a black mark on their FSA register entry.

Capita is actually the only solvent guilty entity which can afford to have blame apportioned to them, but they got off very lightly given the scope of the losses involved.