Equity Income  

FCA tight lipped on adviser action over Connaught

FCA tight lipped on adviser action over Connaught

The Financial Conduct Authority has refused to confirm if advisers be hit with enforcement action over pushing funds in failed unregulated collective investment scheme Connaught.

During the regulator’s annual public meeting today (18 July), the watchdog re-iterated it would appoint a third party to look into firms connected to the collapse of the Connaught Series 1 fund.

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.

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About £118m was invested in the scheme.

Connaught was the subject of a Financial Services Authority warning shortly before the suspension of the Series 1 fund in March 2012, which said Connaught had misled investors over the risk levels in investing in bridging loans.

"In the literature we have seen, the Connaught funds are described as ‘very low risk' and ‘low risk'," the FSA notice read.

"It makes comparisons between investing in them and putting your money in high street bank and building society accounts. We believe this is misleading."

The regulator confirmed it was now in the “later stages” of investigating what went on with Connaught.

However when FTAdviser asked Andrew Bailey, chief executive of the FCA, if action would be taken against advisers who pushed Connaught he said: “I’m not going to speculate, if you don’t mind, on firms.”

When asked would the regulator be taking action based on feedback from the Financial Ombudsman Service, Mr Bailey said the FCA was in regular contact with the ombudsman.

Last December the Financial Conduct Authority agreed to appoint a third party to review the way its predecessor regulated the Connaught Income Series 1 fund.

It followed a complaint to the FCA’s watchdog, the Complaints Commissioner, into the regulator’s role in the fund’s failure.

Antony Townsend, the complaints commissioner, found the FCA “shifted the focus” away from its regulatory failings onto IFAs.

Adam Nettleship, of Surrey-based Bigmore Associates, made a number of complaints including “inactivity in the face of fraud” and covering up regulatory failings by directing the Financial Ombudsman Service to automatically uphold all relevant complaints against IFAs.

With both of these issues Mr Townsend uncovered concerns.

emma.hughes@ft.com