FSA publishes legal basis for £100m Cru redress scheme

So, the FSA publishes a document that they no doubt commissioned, full of legal 'opinion' that they intend to rely upon, which states that IFAs cannot rely on 'opinion'.....right !!

The fund perfomances and asset valuations were published as facts by the investment managers and all the leading data houses - Fin Ex etc.

Obviously an IFA is entitled to rely on the premise that these facts have been checked by those paid to do so.

The FSA's own tech specialist has said so recently and this legal opinion also says so - if someone publishes facts which are not facts then this is what exactly?

@ PB2

You hit the nail squarely on the head there.... an opinion that the facts disclosed were in-fact opinions!

So, when is a fact a fact, and when does a fact become an opinion.

It's pouring down here at the moment - this is a fact

It will pour down here tomorrow - this is an opinion, but, if it does pour down here tomorrow, this becomes a fact

So, if the opinion turns out to be correct, it becomes a fact.

If the opinion turns out to be wrong, it remains an opinion.

If a fact, as presented, turns out to be incorrect, it apparently becomes an opinion.

Let's get this straight... it is impossible to declare any event which may or may not occur at some stage in the future as a FACT...

This kind of makes Rory Percival's comment that "IFAs can rely on facts and not conduct further due diligence" of last week rather pointless!!

As I understand i an IFA would have to do due diligence on any financilal institutions/products recommended regardless of any information published by that company or any 3rd party.

In effect this would make any recommendation fraught with danger only by excluding all minor players would an IFA be safe & then not by doing due diligence (which is impossible within timescales & budgets) but by default.

Even then would an IFA be safe looking at the recent Barclays situation with Libor. In fact will any IFAs who recommended Libor Mortgages be due to be sued because they did not complete sufficient investagations into the major banks?

It's all a total farce.

Being an IFA - The most impossible job ever!

What a jolly handy piece of statute the FSMA 2000 is for the FSA ~ on the strength of legal opinion they can use it to justify doing pretty much anything they want to anyone. I'll be that somewhere deep within its pages is a clause that could be interpreted ~ with the aid of legal opinion, of course ~ as allowing the FSA to nail to tar-coated crosses in front of their offices any IFA's found guilty of regulatory misdemeanours and then set light to them. All of course in the name of consumer protection ~ not exactly the FSA's strongest suit to date but, hey ho, all that's changing with the FSA's tough new interventionist approach.

Being employed by the FSA - The most unaccountable job ever !

Some very good points made above.

As the kid who owns the football, the FSA seems hellbent on achieving its own predetermined conclusion, regardless of the facts, English Law or morality.

The recent LIBOR fiasco has shone a light on how the FSA fulfills (or rather doesn't) its obligations, and the seemingly too cosy relationships that it has with big business; to the detriment of smaller firms and consumers. While Parliament and, to a greater extent, the public about the plight of IFAs, a decision by the SFO to prosecute will raise loud questions as to why the FSA took no action against Barclays' senior management or authorised individuals, who were in clear breach of the Principles of Business.

Of course, none of this is news to us - the precedent would appear to have been set with Capita. If not, why will the FSA not release its report before holding IFAs to account?

As for modern-portfolio theory, my earlier point was that standard deviation sets out the variability (or volatility) of actual returns. Regardless of the risk-adjusted return, the information published by Capita does not reflect the variation of returns that you would associate with a higher risk investment.

@ TVMC

At the upper tribunal the 'expert witness' from the FSA made comment about the liquidity of the funds making them higher risk. How much liquidity is there in a commercial property fund or indeed a corporate bond fund should there be mass redemptions? Are either of the asset classes considered high risk because of liquidity issues.

@Dennis N

I couldn't agree with you more and, until suspension, liquidity wasn't an issue.

For too long, the FSA have asserted risk on the back of historic performance, or geographical location.

Up to the date of suspension, the funds were liquid and exhibited low volatility, in keeping with the fund manager's stated objectives. At no point did the fund's ACD express concern over the suitability, or legitimacy, of the underlying investments or strategy.

I would contend that a reasonable person would view such an investment as achieving the stated objectives; especially in view of the awards won and the IMA's classification of the funds within the Cautious Managed sector. Yes, the final comments are subjective, however, even if the funds proved to be mispriced, I would assert that an adviser should be entitled to consider the actual price movement as objective evidence of low volatility.

It is also a matter of fact that Arch cru's final fund was authorised and launched after the FSA's damning ARROW visit in 2008. Based on the information known at the time, why did the FSA authorise the fund?

Why indeed did the FSA authorise what was really a fund of alternative investment funds before the introduction of the regulatory instrument to allow them?

Just classify everything as high risk and put anyone who is remotely cautious into cash only.

How the hell are IFAS supposed to conduct major dd on every single regulated fund that they recommend without being able to rely on a regulated providers information?

The whole system is an utter joke and quite frankly why the hell do we bother to put up with this complete nonsense from a regulator that is stuffed with incompetent fools who haven't a clue what they're doing. The worse part is that we have to pay for these idiots. Off to Switzerland I go...

The only people making any money in our industry now are those that have opted to become unregulated and promote a range of products to clients without giving advice or being restricted by any ridiculous rulings such as this.

A local business doing this are now taking £1 miilion transfer values out of the NHS pension scheme on behalf of consultants arguing they are not 'giving advice'. Thus causing significant future funding problems to the NHS pension scheme which all tax payers will have to pay, , likely problems for the clients but the FSA just want to continue to beat up IFAs. I know this is off the track of Arch Cru but the unregulated industry , which is expanding fast, appear to carry on without restriction because "they dont give advice and have no liability" and no-one seems interested in monitoring them!

Under the Freedom of Information Act I recently asked the FSA - 'as a result of your investigations could you confirm or deny whether the Fund Managers did invest the Funds as we were advised or did they step outside their brief and invest in alternative funds' -

Naturally I was advised that very sorry 'cannot confirm or deny' since such info might prejudice claims etc -

Everyone should know and a report of their findings made public -

Simples - If the Fund Managers operated outside of their brief then they or of course those responsible for overseeing the operations should be accountable for the loss and make COMPENSATION IN FULL !!

Simple justice please -

@Dolores Chimmichanga

Is that restricted or independent unregulated?

Just unregulated advice for example selling car park spaces in Dubai, forestry in South America and off plan villas and accomodation in hotel complexes in exotic holiday destinations.