The Financial Services Authority (FSA) has announced a £54 million payout for investors in the Arch Cru funds.
The FSA revealed that the funds' institutional counterparties Capita Financial Managers, BNY Mellon and HSBC had voluntarily agreed to pay investors £54 million. Investors will lose any right to take legal action against Capita, the authorised corporate director of the funds, and depositaries BNY Mellon and HSBC, if they accept the compensation package.
The deal will mean investors will recover an estimated 70% of the published net asset value of the Arch Cru funds at the suspension of dealing on 13 March 2009, according to the FSA. Capita will administer the payment scheme and will contact investors before the end of August.
The FSA said it was still considering the role of other parties in relation to the Arch cru funds.
Around 20,000 consumers invested around £350 million into the six Arch cru funds which were promoted by Cru Investment Management but managed by Arch Financial Products. The funds were suspended in March 2009 due to liquidity problems. Investment manager Spearpoint was appointed as manager of the funds following the suspension and began to unwind a series of complex and poorly performing investments in Singapore, Gibraltar, Hong Kong and Nigeria.
Investors in the six funds have received a combined £54 million in distributions since the suspension.
The FSA said: 'This package is a fair and reasonable outcome, which is in the best interests of investors. It provides certainty for investors and will accelerate the return of value to investors.'
The FSA said details of the payment scheme had not been finalised. The regulator plans to discuss whether the Financial Ombudsman Scheme follows the rules of the payment scheme or whether it would consider complaints about Capital Financial Managers separately. The Ombudsman declined to comment until the terms of the payment scheme had been finalised.
Gareth Fatchett, partner with Regulatory Legal, which represents a number of Arch cru investors said: ‘Our 2756 clients will be very pleased to hear that a settlement is being proposed. The devil will be in the detail and we await the information to be able to advise properly,’ he said. ‘The FSA came under pressure across the last two months with literally hundreds of MP’s being contacted by our clients. I suspect that this would have taken longer if the clients had not have organised themselves.’
Solicitor Alan Hughes of Foot Anstey represents a separate group of investors who planned to take legal action against Capita. ‘The FSA seem to be saying that if investors accept this they will get back 70% of what they invested so they will be 30% out of pocket,’ said Hughes. ‘It is up to each individual investor whether they choose to accept it or not…but the advantage of this scheme is that it offers a no risk way of getting back your 70% in total.’