RegulationJul 16 2014

FCA to negotiate Connaught investors settlement

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A negotiated settlement to address investor losses from the Connaught Series one fund, represents the best course of action for all parties, the Financial Conduct Authority said, following an appearance before the All Party Parliamentary Group on Connaught Income funds.

Yesterday, Linda Woodall, director of mortgages and consumer lending at the FCA, appeared before a group of MPs.

In a statement published today (16 July), the FCA said: “The Financial Conduct Authority is focused on securing fair redress for those who invested in Connaught Income funds.

“At this stage, we believe that a negotiated settlement to address investor losses from the Connaught Series one fund represents the best course of action for all parties.

“Therefore, for a limited period, we will support the parties concerned in an attempt to reach a negotiated resolution with a view to obtaining appropriate redress for investors as soon as possible.

“We encourage the parties concerned to engage constructively with us and each other for this limited period to avoid potentially lengthy and costly alternatives to a negotiated settlement.

“This is a voluntary and confidential process, and so we will be unable to comment further on its progress until an agreement is reached or negotiations break down.”

In March 2012, Connaught Asset Management suspended its Series one fund, followed by the Series two fund the following month.

In June that year the Series one fund was wound down, with losses of at least £10m, again followed soon after by the Series two.

Due to increased levels of redemption requests, the Series three Fund was suspended in July 2012 and entered an orderly wind down process.

In June 2011, the Financial Standards Authority released a warning over the funds, calling their descriptions of risk misleading and criticising the probability of receiving promised fixed income payments and additional guarantees on the income.

At the start of May this year, allegations of fraud were investigated by police in relation to the collapsed Connaught funds, but were found by the Financial Ombudsman Service after early decisions to not provide any defence in client compensation claims.

During a Westminster Hall debate earlier this year, the first to be held by the group of MPs looking into the matter, then economic secretary to HM Treasury Andrea Leadsom revealed the police are looking into allegations of misappropriation of funds.