The Financial Services Authority (FSA) has announced that it will proceed with its controversial Arch Cru redress scheme.
The FSA has been consulting on the scheme, which will be funded by advisers found to have mis-sold the funds.
The regulator said it had found evidence of widespread mis-selling of the funds, and that advisers must contact clients to ask if they want their case reviewed.
If clients opt for a review, adviser compensation will help bring them back into the position they would have been in had they not invested in the funds. This is a change from the plans outlined in its consultation, which would have required advisers to review every Arch Cru sale.
Advisers will now have one month from 1 April to contact clients about the scheme, and will be required to let clients who opt in know the outcome of their case by 9 December. The FSA has mandated the wording of a letter advisers need to send to clients.
FSA director of supervision Clive Adamson said: 'Advisers have to accept and understand that ultimately they are responsible for making sure their customers’ interests are protected. If they don’t understand a product or haven’t done the due diligence on it, they are in no position to recommend it to their customers.
'It is important that when mis-selling occurs that consumers can be redressed. The vast majority of advisers maintain very high standards and mis-selling by a few only further erode trust in the market which harms the whole sector.'