The Financial Conduct Authority plans to fine Capita Financial Management for its role in the failure of a high-risk investment which lost investors around £118m.
Unregulated collective investment scheme Connaught entered administration in September 2012 after the failure of its Income Series 1,2 and 3 funds, which provided credit lines to stricken bridging lender Tiuta, a firm that also went into administration in September 2012.
Capita Financial Managers was the operator of the Series 1 fund until September 2009.
In its latest accounts, Capita stated that while the FCA’s formal review of its role in connection with the Connaught Series 1 fund is ongoing, the regulator plans to seek a financial penalty against the firm, as well as redress for losses incurred by investors.
Capita has set aside £37m to pay any potential FCA penalty and associated legal costs.
“The company has taken a prudent approach to this provision reflecting the early stages of our discussions with FCA and the lack of clarity on the basis supporting the FCA's position,” Capita stated in its accounts.
But the final bill could be higher, as Capita has as yet not put aside any money to pay redress claims.
“In respect of the redress the Board does not consider that the Company is liable to pay further sums in addition to the amounts already paid in respect of the settled claims and therefore no provision has been made at this time,” Capita’s accounts stated.
The company has already paid out £18.5m in 2016 as part of a settlement with the liquidator of the Connaught funds.
Capita was also the authorised corporate director of the failed Arch Cru funds, which collapsed in 2009 losing investors around £250m.
In the Capita accounts, the company revealed it has entered into a “full and final settlement” with the CF Arch Cru Funds, on confidential terms.