RegulationJun 24 2013

FSCS to review rejected Rockingham claims

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The FSCS is to review a series of claims it had previously rejected relating to the collapsed adviser firm Rockingham Independent.

The compensation scheme started compensating former clients of Rockingham earlier this year, but in March it said it would not be paying out to investors in the ARM Asset Backed Securities life settlements fund, which has been suspended from trading since the summer of 2011.

However, a spokesperson for the FSCS said today that “some new evidence” has come to light which has led to its position on Rockingham being reassessed.

The spokesperson said: “The FSCS has received a number of responses from claimants since writing to them earlier this year, and some new evidence has been presented to us. The FSCS is now reviewing the evidence against the original view on Rockingham’s liability and hopes to update these claimants shortly.”

The decision could increase the impact of the Rockingham’s collapse on future FSCS bills for advisers.

ARM bonds were sold by Rockingham primarily as part of its Retirement Income Tri-Investment Account product. The adviser firm was fined £35,000 by the FSA in August 2011 for inappropriate sales of unregulated investments, including ARM products.

Rockingham was placed into liquidation in March 2012 but the FSCS initially rejected ARM-related claims as it did not consider the company’s advice “can properly be said to have caused the losses which investors may have suffered”.

The FSCS had taken the view that any losses suffered by investors in ARM products - losses which have yet to be quantified as the fund is restructuring - have been caused by ARM’s failure to gain authorisation to trade by the Luxembourg regulator, the CSSF.

ARM has been in regulatory limbo since 2009 when the CSSF refused to let the fund trade in Luxembourg. It has also been refused a licence in Ireland in spite of having taken on more than £76m in investor money through its UK distributor Catalyst Investment Group. The FSCS said Rockingham was not “legally responsible for warning investors” about this development.

Separately, Catalyst is facing as many as 150 claims against it through the Financial Ombudsman Service.