Regulation  

Catalyst investors could get extra FSCS cash

Catalyst investors could get extra FSCS cash

Investors who invested money with failed fund management firm Catalyst Investment Group may get more of their lost cash back, the Financial Services Compensation Scheme has said.

Catalyst was declared in default in September 2013 and the FSCS has paid compensation for claims surrounding its promotion of funds backed by Arm Asset Backed Securities, which invested in secondhand life insurance policies.

FSCS figures from the 2014/15 financial year show at that time the compensation body had already paid out £69m on the Catalyst default to investors.

Article continues after advert

The administrators of Arm have now announced that a first interim dividend will be paid, with around 89 per cent of this going to the FSCS.

This means people who have received compensation from the FSCS in relation to Catalyst may get more money.

It could also mean a cut for some firms in the levy they pay to the FSCS to cover compensation costs.

In a statement the FSCS said: "The FSCS is considering what additional payments will be due to claimants. We are working closely with the administrators to understand how the dividend is broken down, and the individual calculations will be quite complex.

"As a result, we cannot say at this stage how long it will take us to complete the calculations and make additional payments."

The FSCS has said claimants do not need to take any action. If they are due an extra payment, the FSCS will contact them automatically.

Last year the Financial Conduct Authority fined and banned Timothy Roberts, chief executive of Catalyst, which promoted Arm ‘death bonds’ to advisers before his company collapsed costing investors millions, after he lost his final appeal.

The regulator’s banning and fining of the Catalyst boss followed a ruling by the Upper Tribunal which upheld the FCA’s previous attempts to take action against him and his fellow Catalyst director Andrew Wilkins.

Catalyst was the primary UK distributor of Arm bonds, sold to the public from about October 2007 to October 2009. They were structured products issued by a Luxembourg entity, Arm, the underlying assets of which were senior life settlements purchased in the United States.

In July 2009, the FSA told Catalyst that Arm did not appear to be authorised. At that stage, the FCA said, it was not clear whether Arm needed to be authorised. That same month Arm formally applied for authorisation in Luxembourg and also took steps to transfer to Ireland in May 2010.

In April 2011 the Irish regulator, the Central Bank of Ireland, gave Arm conditions it would have to satisfy in order for its statutory exemption from the requirement to be licensed to be re-instated.

Arm was not able to meet these conditions so the exemption was never re-instated and in August 2011 the Luxembourg regulator, the CSSF, said it would not authorise Arm either.

damian.fantato@ft.com