Campaigning MP David Davis, a prominent backbencher in the Conservative Party, has demanded an explanation from the Financial Services Authority over why it has allowed only limited redress to be paid 20,000 victims of the Arch Cru investment funds scandal.
On 31 August, the FSA announced a £54m package for CF Arch Cru investors who were invested in the CF Arch Cru Investment Fund and the CF Arch Cru Diversified fund on 31 May 2011.
Mr Davis, a leading Tory MP, said in an interview with the Mail on Sunday that he had written a letter to Hector Sants, chief executive of the Financial Services Authority, over concerns that the level of compensation was decided not on grounds of fairness.
The letter was prompted by a letter sent by Mr Sants to Chancellor Osborne in August of this year, in response to a question asked by Mr Osborne on behalf of a constituent.
Mr Sants’ letter, seen by FTAdviser, says: “In making our determination as to the fairness of the package, we had to make a balanced judgement about what would be the best outcome for investors, including, in this case, assessing the probability of investors being able to achieve a better outcome through other means.”
Such ‘other means’, the letter continues, include pursuing a claim through the Financial Ombudsman Service, or “personally suing any one or more of the three parties who contributed to the package”.
Mr Davis said he wrote to Mr Sant and questioned whether the letter “spells out the inability of one of three firms... to meet its liabilities to compensate investors as a reason for the £54m cap”.
He further asked whether the FSA decided that a package of more than £100m could not be funded, adding that this “appears to be the implication of your letter to the Chancellor.”
Joe Egerton, campaigns director for Justice in Financial Services, claimed that emergence of David Davis is the “best news” that investors and IFAs have had “for months”.
Justice in Financial Services is backing a judicial review into the compensation package that is being brought by IFA firm Coull Money, of which Mr Egerton is the sole director. A separate judicial review is being brought by an Arch Cru steering group set up by law firm Regulatory Legal.
Last week, the FSA rolled out a review into IFAs who advised on Arch Cru. The FSA sent a letter to IFAs who sold Arch Cru investments to provide them information to enable the regulator to “undertake further analysis” of the distribution of Arch Cru funds.