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FSCS refuses to compensate Rockingham investors in ARM

by Daniel Grote on Feb 28, 2013 at 10:47

FSCS refuses to compensate Rockingham investors in ARM

The Financial Services Compensation Scheme (FSCS) has said it will not be compensating clients of defunct advice firm Rockingham Independent who invested in troubled life settlement fund ARM.

The FSCS said that while Rockingham may potentially have given bad investment advice on ARM investments, the advice was not the cause of investors' losses.

'Therefore, FSCS does not consider that Rockingham owes a civil liability in respect of losses that claimants may have suffered in relation to ARM investments,' it said.

The FSCS said it believed the legal cause of investors' losses was the Luxembourg regulator's decision to reject ARM's application for authorisation.

'We believe these were not the type of losses which Rockingham was legally responsible for warning investors about. For these reasons, FSCS believes Rockingham does not owe a civil liability to investors and, accordingly, we are unable to uphold claims.'

19 comments so far. Why not have your say?

Simon Webster1

Feb 28, 2013 at 11:50

Surely the same principle applies to Keydata?

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Feb 28, 2013 at 12:07

errr.....and Arch Cru too presumably? Surely the same principle applies:

The FSCS said that while Rockingham may potentially have given bad investment advice on ARM investments, the advice was not the cause of investors' losses.

Although clearly not when it comes to the spinning FSA who simply point the finger of blame at whoever they feel like and can get away with.......logic seemingly doesn't have to prevail as far as they are concerned.

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Julian Stevens

Feb 28, 2013 at 13:38

No chance of any consistency to any decisions made by the FSCS then? Then again, there appears to be little consistency to any of the decisions announced by the FSA, the FOS or any other regulatory body. They just make it up as they go along and no body exists to hold any of them to account.

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Feb 28, 2013 at 16:16

you're not going to get any consistency, the FSCS pays out "its" own money (although we know where that comes from!), whilst the FOS instructs other people to pay out their money...

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Missold Investor

Mar 01, 2013 at 09:47

@Julian Stevens. Absolutely right. Nothing exists to hold FSCS to account. The rules are supposedly set by FSA, but the FSA refuses to intervene in what they consider to be FSCS 'operational matters', and the FSCS 'independent investigator' has no power to overturn FSCS decisions. FSCS is out of control.

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David Sanders

Mar 01, 2013 at 11:45

FSCS is proved yet again to be a shambles. One wonders what is more important to them: dealing justly with investors, or trying to keep the IFA levy down.

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White Stick follower

Mar 01, 2013 at 11:46

Similar for other Plans. Some investors compensated some not. FSCS view in respect of the Plans is, the warnings were adequate.

FSA's review of SCARPS was highly critical of the marketing and advertising of these products, some of which contained totally untrue statements. FSCS's logic would never stand up to independent scrutiny, given that some compensated Plans featured exactly the same wording, apart from the date, (FSCS' view- Warning) as those Plans which were not compensated. Add to this Rejection letters which are factually & legally wrong. What does FSCS do when these 'errors' are pointed out- it just ignores these facts as though the errors had never occurred.

FSA is the Regulator of FSCS, but says it cannot interfere in case decisions, even when inaccurate and legally defective arguments are used to support defective FSCS's decisions. What use is a Regulator that cannot, or does not, regulate when its protege gets things wrong?

The professional industry has an Appeals Panel used when FSA's rulings are disagreed. Why is an Independent Appeals Panel not available to retail investors? The only redress available to retail investors is the highly expensive Judicial Review, and how does anyone who has lost most of their savings fund that? Is this fair? No it is not.

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White Stick follower

Mar 01, 2013 at 12:13

@ David Saunders FSCS boldly announces in letters that it is 'the expert decision maker'.What a delusion. It takes an intelligent man to know he's a fool. Easy for FSCS to self proclaim expertise when there is no one able or willing to slap it down, apart from the Judiciary which has done so again recently.

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Gillian Cardy

Mar 01, 2013 at 13:56

But this is saying FSCS isn't going to pay out - which ought to be good news ... though absolutely accept that we need to make sure that FOS takes the same view, and challenge why the same approach wasn't taken with Arch cru ...

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Julian Stevens

Mar 01, 2013 at 14:08

Of course it's good news that we aren't going to have to fund yet another mass pay-out without being given any say in the matter, but the question is why did we have to stump up to cover most of the losses incurred on KeyData and ArchCru?

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Missold Investor

Mar 01, 2013 at 14:10

@Gillian Cardy. Could you help us understand what you mean by good news? If these customers were misadvised (as FSA concluded 18 months ago when they fined Rockingham £35k) how is this good news?

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Gillian Cardy

Mar 01, 2013 at 16:06

@Julian : I know it's one question but it's not the only question that was being asked above - if advisers are concerned about picking up the liabilities for firms that behaved badly then it is good news that the FSCS attributes the blame to the correct parties.

@Missold Investor : you are no doubt aware that this is an adviser facing site - and I was responding to the earlier observations about the extent to which good advisers remaining in business end up paying for the sins of other firms no longer in business. And from their point of view it is good news that they are not paying the bill for Rockingham's failngs, or ARM's failings.

The point is that Rockingham or ARM should be paying for their own failings.

This is why I continue to try to find a basis for action in the Arch cru situation. Liabilities for firms who behaved badly must be picked up by the parties that were responsible for the failure (as Mr and Mrs Huhne found out to their costs).

You are right, it is not acceptable that you have incurred investment losses as a result of the failure of either Rockingham or the ARM investments - just like it's not acceptable for Arch cru investors, or Keydata investors - and it's not acceptable that the various regulatory parties will not follow their own rules and hold the right people to account.

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Mar 01, 2013 at 16:44

@ Gill Cardy - well said

But are you making any progress regarding the Arch Cru scandal as the deadline for the s404 Redress scheme is now only one month away? Many have tried and all have seemingly failed in the face of the Canary Wharf bullyboys who fight dirty and with our money.

From 1st April onwards the FSA will no doubt be hoping their estimate of 15-30% of requests for "reviews" will be widely far of the mark. Many more investors will thus be "compensated" as it's hard to see how any review would fail to result in a "mis-selling" outcome given the disgraceful skewing of the facts/process by the FSA.

Then the FSA can clap their hands at a job well done and head off towards the next car crash they can subsequently dump on advisers because, by then, they will have a precedent well and truly in place!!

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White Stick follower

Mar 01, 2013 at 17:28

Why did so many mis-selling cases occur? Putting aside if I may the either inadequate or improper actions of some Plan providers and/or IFA's , largely because FSA failed to do its job - i.e. Regulate. Regulating should mean actually looking at what was coming into the market place, e.g. the post disaster ban placed on Precipice Bonds by FSA only for it not to notice SCARPS replacing them, and monitoring behaviour of industry professionals. The SCARPS were effectively the same product as the Precipice Bonds. When the wheels came off & investors lost fortunes in certain SCARPS Plans FSA did a review and highlighted improper behaviour by some Plan marketers, and of course, set out a list of what should not have been done, with the standard phrase 'This must never happen again'.

By way of an aside FSCS decided that certain COBS Rules breaches by some Plan providers did not apply. FSA said that they did, so FSCS then told investors that the breaches were not relevant to their claims of mis selling. Rules are Rules accept when FSCS says they are not it seems!

As for FSA, as it sails into the sunset, ready to emerge with resplendent in its new title & regalia- and higher salaries what was done to reward failure? Oh yes a Knighthood was awarded to its CEO in recognition of his services. And of course all the previous failures can be consigned to the bin, as FSA no longer exists

But why was the FSA structure set up as it was? Well the industry wanted self regulation and agreed the price, i.e. to pick up the costs. Unfortunately those costs, however much I sympathise & agree with the sentiments above also included the good guys paying for the failings of the bad or incompetent.

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Gillian Cardy

Mar 01, 2013 at 17:30

Well ... I think I am making some progress - but you'd expect me to be cautious.

Foot Anstey is gathering support for a challenge to the S.404 scheme and I am awaiting a QC opinion on the validity of an alternative grounds for action.

Foot Anstey's action is the more pressing one as they must have submitted their claim before 17 March - ALL advisers should be supporting this challenge as ALL advisers will be picking up the pieces - saying you didn't advise on this will not remove the financial consequences of this happening. If every authorised firm donated £50 to the fighting fund they would have the resources for their opinion and the challenge.

For more information about the direction of travel with the action on which I am awaiting an opinion please contact me offline gillian.cardy@ifacentre.org.uk

Advisers AND (especially given that investors clearly read this as well as advisers!) investors NOT covered by the S.404 scheme should express an interest!!

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Missold Investor

Mar 02, 2013 at 11:28

So we have a system that does not work for any of us. The regulator fails to regulate, and expects the industry to pay the compensation bill, administered by FSCS. The industry considers the funding system to be unfair, and puts political pressure on FSCS. FSCS makes seemingly arbitrary judgements on whether to pay compensation. FSCS is left to get on with it by the regulator, free from scrutiny.

FSCS is supposed to be the compensation fund of last resort for customers of authorised financial services firms. As more and more savers lose trust in FSCS, this can only be bad news for all.

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White Stick follower

Mar 02, 2013 at 12:03

@Missold Investor

Perhaps the failing level of trust is why FSCS is spending substantial sums on a high profile advertising campaign. Alternatively perhaps it realises that the public no longer trusts financial institutions and is trying to shore them up, as I assume that campaign is paid for by the industry. So FSCS in its Arthur Daley mode seems to be saying 'Stand on me John'.

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David Sanders

Mar 02, 2013 at 17:16

Readers may be heartened by the following, from FSCS's Budget 2013/14 document.

Lawrence Churchill CBE states:-

'I became Chairman of FSCS on 1 April 2012. Since

that time I have had the opportunity to experience

the organisation first hand, and have been struck by

the admirable shape the organisation is in despite

the range and complexity of its remit. The calibre

and commitment of its people have particularly

impressed me.'

For those of us who have enjoyed years of dealing with FSCS staff, the last sentence is particularly to be savoured. Clearly the sloppinesses and inconsistencies we have observed at FSCS are the exception, not, of course, the rule.

If you ask me, the good Mr Churchill should have gone to Specsavers. Was it significant that he became Chairman of FSCS on All Fools' Day?

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White Stick follower

Mar 02, 2013 at 17:24

Or perhaps Mr. Churchill follows the line 'If you don't ask the questions you don't get the answers'. Ignorance is bliss!!

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