The Financial Conduct Authority has written to adviser firms where 20 per cent or less of their clients have ‘opted in’ to have their case reviewed under the Arch Cru redress scheme.
The FCA said it wants to ensure that clients are given a “fair chance” to have their advice reviewed.
Last year, the Financial Services Authority launched the Arch Cru consumer redress scheme and told advisers they would have one month from 1 April 2013 to contact clients to give them the opportunity to ‘opt in’ and have their case reviewed.
This will force advisers to identify cases where they may have mis-sold Arch Cru funds and make redress payments where appropriate.
However, the FCA has now written to adviser firms where only 20 per cent of clients have opted-in. This compares to a 48 per cent average across all firms within the redress scheme.
The letter said the regulator is undertaking a “verification exercise” across an unspecificed number of firms whose opt-in rate is comparably low to investigate why clients have not opted for a review of their advice.
This exercise will involve contacting a sample of clients and is designed to assess whether firms sent the appropriate communications and whether firm contact with clients has influenced client requests for a review of their advice.
The regulator has requested a detailed explanation from those firms as to why the opt-in rate is low. Firms will also need to explain in detail the steps they have taken to enquire about low opt-in rates.
Failure to comply with this request may result in further regulatory action being taken against firms, the regulator warned.
A spokesman for the FCA said: “In April 2013 firms wrote to their affected clients inviting them to opt-in to the Arch Cru consumer redress scheme.
“We have noticed that there is a much lower opt-in rate at some firms compared to others, and we want to know why.
“We are now contacting a selection of firms that have a much lower client opt-in rate to ensure that anybody entitled to compensation under the Arch Cru consumer redress scheme is given a fair chance to have their advice reviewed.”
Previously the FSA said it expects between 15 and 30 per cent of investors to opt-in.
The amount the FSA has stated consumers are thought to have lost and that therefore falls within the scope of the scheme has risen to £141m as a result of revaluations. With 80 per cent of firms likely to comply, this means around £112m will be produced, the regulator added.
The regulator said actual redress paid would therefore be around £20m to £40m based on the estimated number that will opt in.