Getting a fairer Arch Cru deal: Alun Cairns MP
Leader of Arch Cru APPG talks to FTAdviser about why the Arch Cru funds failed and who is responsible.
Arch Cru is probably one of the most notorious fund brand names of recent decades, for all the wrong reasons.
At its peak the brand was represented across six Oeics as well as a range of Guernsey-based investment funds, with funds under management totalling more than $1.5bn.
It will forever be remembered, however, as one of the worst ever fund collapses, with around 10,000 clients losing most of approximately £422m of investments, which were largely advised by IFAs.
The Arch Cru funds were suspended in March 2009, yet more than two years later investors are still waiting to be compensated.
They now have a voluntary offer of redress that it is claimed will return a chunk of the losses incurred, but many, including a number of politicians, believe the £54m package being offered by the authorised corporate director Capita and despositories BNY Mellon and HSBC is not enough.
The Financial Services Authority, which brokered the offer, has described the package as “fair and reasonable”, but this has been questioned by the industry.
At the moment I haven’t yet seen a robust defence of the accusation of widespread mis-selling by IFAs, but that is not to say that it doesn’t exist
In August 2011, the FSA said the deal should return about 70 per cent of investors’ capital. Law firm Regulatory Legal argued that the reality is that most clients can “expect losses of 50 per cent plus”.
Alun Cairns, conservative MP for the Vale of Glamorgan constituency and leader of the Arch Cru all-party parliamentary group, has been particularly vocal about wanting to get the best possible outcome for investors.
Mr Cairns got involved when a number of his constituents contacted him, worried about their Arch Cru losses.
“I then discovered that a couple of Parliamentary questions had been tabled about it, spoke to those MPs and it seemed they were in a similar situation with constituents complaining to them. Then it was a matter of tracking back and researching the fund and seeing what had happened.
“It seemed initially to me that from the time the fund had been suspended there was a considerable period before any action or before there as any publicity around any action that had taken place, so I then started pursuing it seeking to get answers from the FSA.”
It was around this time the regulator announced the £54m redress package. In seeking to evaluate whether “it was a fair deal or not”, Mr Cairns was prompted to research the Arch Cru structure and pursue the case by setting up an all-party parliamentary group.
Reasons for failure
For his own part, Mr Cairns believes there are “several reasons” for the failure, citing the marketing of the products to IFAs and the use the Channel Island Stock Exchange to list open-ended investment companies, which he says the FSA does not normally permit.