Regulation  

FCA settlement discussions on Connaught to roll into 2015

The Financial Conduct Authority has extended its “support” for negotiations to address investor losses in the Connaught Series 1 Fund until January 2015, after intensive talks through the summer working towards an original deadline of the end of October failed to yield a settlement.

According to a notice published on the regulator’s website, since mid-July the FCA has devoted “considerable time and resource” facilitating attempts to reach a “practical and timely resolution”.

The statement adds: “We are working closely with interested parties and our current view is that it is still in the interests of investors for the FCA to continue to support these negotiations with a view to obtaining appropriate redress for them.”

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Separately, a judgement was expected today in the case between Connaught Income Fund Series 1 and Capita Financial Managers in the Royal Courts of Justice.

At the start of May an All-Party Parliamentary Group looking into the collapsed funds held its first debate, raising questions over the sprawling and confusing nature of regulation of so-called ‘unregulated’ investments, as well as a perceived lack of transparency by the regulator itself.

During the debate, serious criticisms was levelled at Capita, the FTSE 100 outsourcing firm that has secured a host of government contracts and whose subsidiary, Capita Financial Managers, acted as authorised corporate director of both the Connaught and Arch Cru funds.

Capita has not yet been hit with any penalty or censure or penalty by the FCA over Connaught. It is not clear to what extent the firm knew anything of the troubles at the firm when it sought to remove itself as director in 2009.

By the middle of July, the regulator had announced that a ‘negotiated settlement’ represented the best course of action for all parties, following its appearance before the All Party Parliamentary Group.

In March 2012, Connaught Asset Management suspended its Series 1 fund, followed by the Series 2 fund the following month. In June that year the Series 1 fund was wound down, with losses of at least £10m, again followed soon after by the Series 2.

peter.walker@ft.com