Arch Cru redress ‘inappropriate’ and ‘damaging’, Aifa
More on Companies & People
- Ros speaks out and DWP tinkers: week in news
- New lender launches into mortgage market
- Momentum Pensions launches Sipp for smaller pots
In focus: Arch Cru
A £100m redress scheme consultation for investors who may heve been mis-sold Arch Cru funds could have a “detrimental effect on both advisers and consumers”, the Association of IFAs has argued.
The trade body today (29 May) called on advisers to respond to the Financial Services Authority’s consultation paper on the Arch Cru redress scheme, titled Consumer redress scheme in respect of unsuitable advice to invest in Arch Cru funds.
The FSA launched its consultation in April of this year for a scheme which could give more than £100m in compensation to investors who were mis-sold CF Arch Cru Investment and Diversified funds, in addition to the £54m payment scheme already announced last year.
Chris Hannant, policy director at Aifa, said: “We have deep concerns about the proposed redress scheme and this apparent retrospective application of standards. The FSA must also explain why a redress scheme is necessary and why it has dismissed the other options for consumer redress.
“The FSA’s power to develop redress schemes was granted in order to tackle issues of industry wide systemic risk, such as payment protection insurance. It was not intended to be used for a single regulated entity such as Arch Cru.
“A redress scheme, in this instance, is therefore inappropriate and threatens to damage the long-term sustainability of the profession.”
In a recent interview with FTAdviser, Mr Hannant claims larger institutions such as HSBC, BNY Mellon and Capita are due to get off “quite lightly” according to the scheme currently proposed by the FSA.
Mr Hannant added that the unrestrained use of redress schemes is “simply not affordable” for the advice industry.
He said: “Compensation payments for this year could run to nearly three times what the FSA itself considers affordable. This is not to mention the effect schemes will have on Professional Indemnity Insurance premiums, excesses and exclusions.
“We are urging advisers to consider how this scheme will affect them, directly and indirectly, and to submit their thoughts to the FSA’s consultation. Advisers should consider the cost of reviewing files, as well as the impact the scheme will have on their insurance.
“The FSA must focus on regulatory responses that are fair and proportionate. This is neither, and we urge advisers to make sure their voice is heard by regulators.”