Advisers are set to pay a total of £31.5m under the Financial Conduct Authority’s consumer redress scheme for Arch Cru investors with payouts so far reaching £8.3m being paid out, data published by the regulator has revealed.
Data published by the regulator today (27 January) reveal that under its consumer redress scheme, 3,414 sales have been reviewed by affected adviser firms and 85.4 per cent of these have been found to be unsuitable.
The FCA said this is consistent with the results of a review undertaken by the FCA before the consumer redress scheme was set-up. It stated more than £8.26m has so far been received by consumers and the total redress due under the scheme is calculated to be £31.47m.
In December 2012, previous regulator the Financial Services Authority launched a consumer redress scheme, which forced advisers into identifying cases where they may have mis-sold Arch Cru funds and make redress payments where appropriate.
The scheme was later changed to limit the burden by giving eligible consumers the option to ‘opt-in’, thereby allowing them to refuse compensation where they were happy with the advice they received.
The amount the FSA stated consumers are thought to have lost and that therefore falls within the scope of the scheme rose as a result of revaluations to £141m from £100m. With 80 per cent of firms likely to comply, this meant around £112m of losses were covered.
The regulator said actual redress paid would therefore be around £20m to £40m based on the estimated number that will opt in, up from earlier estimations of as low as £16m.
Firms had until 9th December 2013 to review the advice for these clients and submit their assessments to the FCA for redress to be calculated where appropriate.
Clive Adamson, director of supervision at the FCA, said: “The vast majority of firms have co-operated with us, helping ensure that this compensation scheme has progressed as smoothly as possible.
“We’re now seeing compensation flow to those investors who were mis-sold. We will continue to monitor progress to ensure consumers affected by Arch Cru receive redress as quickly as possible.”
Investors in Arch Cru funds had two options for redress: they could accept a proportion of Capita, HSBC and BNY Mellon’s £54m redress scheme and, additionally, they could ask advisers to review their files to participate in the FCA’s redress scheme.
An estimated 2,000 private investors have rejected the Capita offer, City law firm Harcus Sinclair revealed last week. Harcus Sinclair said this amounts to over £50m of investors’ funds who remain able to sign up to a litigation against Capita until the end of March this year.
The law firm said Capita’s offer of roughly 15p in the pound was considered ‘derisory’ by 800 investors who are already pursuing their claim through Harcus Sinclair. Capita’s offer closed at midnight on 31 December.
In November 2013, a group litigation order was granted by the High Court to investors seeking redress from Capita Financial Managers Ltd, the authorised corporate director of the CF Arch Cru Investment Funds and CF Arch cru Diversified Funds.
However, those that accepted Capita’s offer could not take part in the litigation action launched by law firm Harcus Sinclair.
