A drawn-out legal battle between the FSA and the stricken life settlements fund ARM Asset Backed Securities has cost the cash-strapped company £2.5m, the fund’s board has claimed.
Roughly £38m which had been invested in ARM’s ninth, 10th and 11th bond issuances has been frozen in UK bank accounts since November 2011 when the FSA took action to prevent assets being moved from NatWest and HSBC accounts.
Since then ARM has been forced to seek legal opinions in both the UK and Luxembourg as to who owns the money - the investors or ARM - and the FSA has also encouraged UK investors in ARM to seek their own legal advice.
In an update posted on the stock exchange the board of the Luxembourg-based fund said it had informed the FSA of the cost of the legal battle.
The board said: “While it has been almost 10 months since the board [sought] the [legal] opinions, and while we continually were frustrated by missed deadlines set down for the conclusion of these opinions, we are now confident that the elusive conclusion to this saga... is in sight.”
The board added that it would use the legal opinions to put pressure on the FSA to release the money, although it did not state which party will take ownership of the cash.
ARM is close to completing the sale of its portfolio of second hand life insurance contracts to Financial Credit Investment Limited, which was announced in November 2012.
The board has promised to file accounts and provide investors with updates on the valuation of their investments once the sale is complete, following pressure from Ernst & Young, which has been overseeing the fund’s operations since being appointed by the Luxembourg regulator in 2011.
ARM issued roughly 2,000 bonds to UK investors, raising approximately £76m, through its UK-based distributor Catalyst Investment Group.
ARM products were widely sold by Rockingham Independent. The FSCS has begun compensating Rockingham clients but cannot compensate ARM investors until any investor losses can be quantified.
