£100m compensation scheme for mis-sold Arch Cru Fund investors
The Financial Services Authority (FSA)
has launched a 3-month consultation into establishing a scheme to compensate investors
in failed Arch Cru funds.
Originally worth £363m, Arch Cru funds were suspended in March 2009 and are now only worth some £83m.
The compensation scheme will oblige all independent financial advisers (IFAs)
who sold Arch Cru funds to contact their clients
within 4 weeks and advise whether individual cases are within the remit of the scheme.
If redress is appropriate, IFAs would use an online FSA calculator to estimate each payment
, which will also account for how much investors can claim from a separate scheme already established.
Notice of how much compensation is due should be sent out within 6 months
, with investors paid within 28 days of acceptance.
If the scheme goes ahead, it will be the first to be set up by a regulator under powers which were updated in 2010. According to the FSA, the initiative could pay compensation of £110m to between 15,000 and 20,000 consumers
It follows a £54m payment scheme announced last year between Capita Financial Managers, BNY Mellon and HSBC Bank, in which clients have been returned financially to the position they were in prior to the mis-sold investments
The FSA has created a template which IFAs would need to follow in order to decide on the suitability of sales
. With firms obliged to report on the progress of their review, the FSA has calculated the total cost of the scheme as between £6m and £11m.
Clive Adamson, the FSA's director of conduct supervision, said the authority had evidence that clients seeking lower-risk investments have put thousands into the Arch Cru funds.
"It is right that these consumers are put back in the position they expected to be in when they took the advice," said Mr Adamson. "This is the first time that we have used this consumer redress power and it is going to form an important part of our consumer protection tool kit."
"We will be working hard to reduce the number of large scale failures. But where they do occur it is imperative that we can get redress to consumers who have lost money through misselling as fast as possible."