FSCS: Arch Cru IFA claims to be processed in ‘weeks’

The Financial Services Compensation Scheme has confirmed that claims brought by investors in the failed Arch Cru funds against advisers will be processed in “weeks, not months”.

In email correspondence with a source on the timetable for Arch Cru investors’ claims, which FTAdviser has seen, Mark Neale, chief executive of the FSCS, said he understood “the frustration of investors in Arch Cru who have been waiting a long time to see progress on their claims.

He added that the failure of Arch Cru had raised “complicated issues” and that the Compensation Scheme was working through these and “expects to be able to clarify its position shortly”.

When pressed by the source Mr Neale admitted in an email dated 26 January that he was “reluctant” to commit to a timetable because there are “legal and financial issues to resolve”, but he said that he expects claims to be processed in “weeks, not months”.

Arch Cru funds were suspended by the Financial Services Authority in March 2009 on the grounds of insufficient liquidity to meet redemptions. This means March 2012 will be the third anniversary of the suspension of the funds and investors’ claims.

The FSA announced a £54m compensation package in June 2011, funded voluntarily by the authorised corporate director of the funds, Capita Financial Managers Limited, and the CF Arch Cru funds’ depositaries, BNY Mellon Trust & Depositary HSBC.

Spearpoint, the fund manager of the funds, has filed a £150m litigation against Arch Financial Products, included within which is a £106m sub-claim relating to losses suffered by six of the cells from Arch’s investments in Greek shipping deals, which Spearpoint said were made against the advice of Arch’s own lawyers.

Gareth Fatchett, director at Regulatory Legal, said: “This is good news for investors. The position is complex. That said, in about 6 weeks time, it will be the 3rd anniversary of the suspension of the funds.”

Mr Fatchett said that he believes the FSCS’s latest £40m levy, which will cover losses incurred against not only Arch Cru but also other failures such as Keydata and MF Global, is “the tip of the iceberg”.

In December, the FSCS told FTAdviser’s sister paper Investment Adviser that the scheme’s ‘investment intermediation’ levy sub-class is in deficit because it has been forced to pay out more than expected to compensate investors in Keydata, Wills & Co and other failed firms.

The FSCS claimed the deficit was likely to launch a new interim levy on investment intermediaries in early 2012 to cover the shortfall, “although the £40m figure could fluctuate by then”.

According to Mr Fatchett, the levy is set to “go through the roof” following the process of investor claims.