View the article online at http://citywire.co.uk/new-model-adviser/article/a646247
FSA pledges clampdown on Arch Cru 'phoenixing'
by William Robins on Dec 17, 2012 at 15:54
The Financial Services Authority (FSA) has said it is prepared to clamp down on firms 'phoenixing' in the wake of the Arch Cru scandal.
The regulator is proceeding with its planned Arch Cru redress scheme, funded by advisers found to have mis-sold the funds. But it has amended its original proposals, so that advisers will now only be forced to review sales where clients 'opt in' to the scheme.
Linda Woodall (pictured), FSA head of investment intermediaries, said the regulator was aware of concerns some advisers could 'phoenix' firms and escape their liabilities.
‘There is a concern we are aware of,' she said. 'We have got measures in place on our system. If they start to come back in to the industry, we will be able to make reference to intelligence in those people. We are aware of the vast majority of these sellers.’
The FSA estimated 100 firms would fail as a result of the compensation scheme, on top of 110 firms that have already cancelled their permissions as a result of Arch Cru. However, Woodall said this as a ‘worst case’ estimate and the real number could be lower.
‘We estimate the worst case is 100 but that does not take into account those who will be able to claim on professional indemnity cover or the possibility that they may have got suitable advice,' she said.
The FSA has estimated between 15% and 30% of eligible investors will opt in to the Arch Cru redress scheme, meaning a potential bill for advisers of between £20 million and £40 million, down from the £110 million it originally estimated.
Woodall said it based its assumption on letters it received from clients who did not want advisers to be made to pay for Arch Cru liabilities.
‘There are two fundamental reasons behind that assumption. We received a number of letters for clients who didn’t want their adviser to be forced to pay out. So we assume there are other clients of that view,' she said.
‘Also, where we have applied an opt-in in the past that sort of figure has been our experience. The reality could be more but that is our best estimate.’
News sponsored by:
As the UK coalition government strives to rebalance the national economy, so called 'reshoring' looks set to play an increasingly important role in economic recovery.
Today's top headlines
Alastair Mundy met Citywire's Daniel Grote at the London Stock Exchange Studios for a detailed interview about the Investec Cautious Managed fund.
More about this article:
More from us
by William Robins on Aug 01, 2014 at 07:45