Regulation  

FCA continues Connaught settlement talks

FCA continues Connaught settlement talks

Connaught settlement talks are still ongoing to see if an agreement can be reached to address investor losses, according to an updated from the Financial Conduct Authority.

The FCA said it has been working with the liquidator of the Connaught Series 1 Fund and its former operators, Capita Financial Managers Limited and Blue Gate Capital Limited, to “see if an agreement can be reached to address losses by investors in the fund”.

It stated: “The FCA believes it is worthwhile continuing this process and we will provide an additional update as soon as possible, and in any event, by the first week of March.”

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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.

In November last year, the FCA warned that settlement discussions would roll into 2015. On the same day, liquidators acting on behalf of the Connaught Income Fund Series 1 were given permission by the High Court to pursue the fund’s ‘operators’, CFMs and Blue Gate, for breach of duty.

Judge Mackie ruled that the fund could pursue a claim against the operators, as he told the defendants’ arguments over whether the action in this case was “necessary” were an “unpromising starting point”.

The ruling was procedural and based on a number of technical points of law, as to whether the claimants were able to bring an action, and did not consider the substance of the arguments.

At the start of May last year, 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 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.

donia.o’loughlin@ft.com