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ARM vows to hit back at FSA’s ‘unhelpful’ advice

Board of ailing life settlement fund to challenge FSA over conflicting advice as it prepares to finalise restructuring.

By Nick Reeve | Published Jul 27, 2012 | comments

The board of stricken life settlement fund ARM Asset Backed Securities has vowed to challenge the FSA, after investors hit out at the regulator’s “unhelpful” advice over the status of pending investments.

Some of the later investors in the Luxembourg-domiciled fund were never issued with bonds as the fund was refused licenses to trade in both Ireland and Luxembourg.

The FSA then froze bank accounts containing the three ‘tranches’ of investments in November 2011, and is waiting for legal rulings in Luxembourg and the UK to determine the ownership of the money.

In a stock exchange announcement today, the ARM board pledged to fight conflicting FSA comments regarding the legal rulings, as the regulator recently also told investors to seek their own legal advice on top of the ongoing legal deliberations.

The board said: “[We] will raise this statement with the FSA and ask them to clarify their position. At present [we are] not in a position to refund any monies due to the freezing order and [we] continue to try to find a resolution to these issues.”

More than £76m was invested in ARM, a Luxembourg-based life settlements fund, by UK investors through Catalyst Investment Group, the fund’s UK distributor. In total the fund attracted $182m (£115.8m) from investors.

ARM has been unable to meet income payments to investors since August 2011, which has prompted a restructuring process. If no deal can be reached, advisers face being hit with compensation costs through the FSCS levy, as Catalyst is regulated in the UK.

The board will name its preferred bidder for restructuring next week, after selecting the two best bidders from a list of 13.

The board said the total of 13 bidders for the restructure had been more than expected, which had delayed the process of choosing the preferred options. It declined to name the two bidders.

After the winning bidder is selected, it will be given a further three weeks to carry out due diligence on the portfolio of life settlements contracts.

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