Capita: ‘Other parties’ off the hook on Arch Cru

Capita has attempted to deflect some of the criticism it has received over the failure of Arch Cru, telling secretary of state Chris Huhne that “other parties” involved in the administration and distribution of the funds have not been held to account or “contributed anything to investors”.

Mr Huhne, Liberal Democrat member of parliament for Eastleigh, Hampshire and secretary of state for energy and climate change, wrote to Capita’s chief executive Paul Pindar on behalf of a constituent, who is lobbying for full compensation for investors in the funds.

The constituent’s letter references the Westminster Hall debate that took place in October and reiterates statements by some MPs that Capita should be obliged to pay 100 per cent compensation. It also states that the FSA “does not plan to discipline Capita”.

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Capita has confirmed that it is due to be issued with disciplinary action by the Financial Services Authority, which FTAdviser has previously revealed is due to issue a final notice to the firm over its role in the funds’ collapse, in a letter to government minister Chris Huhne MP.

The firm, the authorised corporate director of the Arch Cru funds, refutes claims that the Financial Services Authority does not plan to discipline it and confirms the impending issuance of a final notice from the regultor.

In response to Mr Huhne, John O’Donnell, senior compliance manager at Capita, said: “We would, however, note that it is not correct that the FSA ‘does not plan to discipline Capita’.

“CFLM [Capita Financial Managers Limited] has already confirmed in the publications issued regarding the payment scheme that the FSA will, in due course, be publishing a notice (known as a final notice) setting out its findings in relation to CFML’s role as ACD of the CF Arch cru funds.”

The FSA confirmed to FTAdviser that a final notice implies that a firm could receive a fine or a ban could be issued against an individual.

Capita also defends its own actions in the letter, saying that it has voluntarily offered £54m compensation, alongside BNY Mellon and HSBC, despite the FSA having “not determined CFML to be responsible for the losses which investors have experienced”.

The letter adds that “other parties” were involved in the administration, marketing and distribution of Arch Cru funds, but that none of these have been held to account or “contributed anything to investors in respect of any losses which have been caused by their actions”.

In addition, Mr O’Donnell’s letter refers to investor complaints to the Financial Ombudsman Service on advice given by IFAs.

The letter says: “No one would suggest that IFAs who have complied with their own duties should bear a responsiblity to compensate investors.

“Equally, however, if IFAs have recommended unsuitable investments, or have advised their clients to concentrate a high proportion of their assets in one investment without properly understanding the risks involved, then they will be liable to face complaints from their clients.”

Joe Egerton, campaign director of Justice in Financial Services, believes Arch Cru compensation claims may go on for years. He said: “Every single complaint will need to be adjudicated individually to determine the facts of each separate piece of advice.