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Treasury in talks over fresh Arch Cru payout

by Jun Merrett on Dec 06, 2012 at 07:46

Treasury in talks over fresh Arch Cru payout

The UK and Guernsey government are to meet to discuss further compensation for investors in the failed Arch Cru funds.

Kevin Stewart, Guernsey's minister of commerce and employment, is to meet economic secretary to the Treasury Sajid Javid today (pictured) in an attempt to get the UK government's support to establish a settlement for investors funded by all parties involved in the funds.

This would include the previous investment managers Arch Financial Products, the cells' former administrators Bordeaux Services, the cells' former directors, the custodians HSBC and BNY Mellon, fund administrators Capita and auditors Moore Stephens.

Stewart said he believes a globally negotiated settlement would deliver the most money back to investors.

'I am pleased to have the opportunity to meet the new economic secretary to the Treasury on Thursday, when we will discuss a number of issues of mutual interest,' he said.

'Guernsey's government does support the principle of a global settlement between all of those parties in the Arch Cru funds. That is because this seems to be the most promising way to work towards meeting the most important objective - securing the best possible return for investors.

The All Party Parliamentary Group for Arch Cru, headed by MP Alun Cairns, has been fighting for a settlement and recently said it had the support of both the Financial Services Authority (FSA) and the Guernsey Financial Services Commission for the plan. The cell companies that made up the Arch Cru funds were based in Guernsey and listed on the Channel Islands stock exchange.

Any settlement provided to investors would be in addition to the £54 million payout brokered by the FSA and funded by Capita, BNY Mellon and HSBC. The FSA is also consulting on a further £110 million scheme, to be funded by advisers found to have mis-sold the funds.

New Model Adviser® also understands the Guernsey government is looking to the Treasury to put pressure on a number of the UK-based insurers of the Guernsey companies to pay out.

11 comments so far. Why not have your say?

Nick

Dec 06, 2012 at 09:00

and what happens when the UK and Guernsey taxpayers find out that they are paying to subsidise Capita?

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David Craik

Dec 06, 2012 at 09:11

If the Governments involved are happy to pay to cover up the failings of the FSA, that is fine by me. The last people to foot the bill should be the IFA's either through a 404, FOS or FSCS

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Ned K

Dec 06, 2012 at 09:41

Well done Alun Cairns and the APPG!. I suspect that the CF Arch funds are the tip of the iceberg with Capita and the FSA. There is more lurking beneath the surface!

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Feeling Poorer

Dec 06, 2012 at 11:33

Will believe it when something actually happens!

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Bob Donaldson

Dec 06, 2012 at 14:42

I bet the FSA is keen to get a settlement. The sooner this goes away then it is off their back and no blame lies with them!

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Nick

Dec 06, 2012 at 15:00

I think Bob that the FSA are trying to put things off until next year, when they will be gone!

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Phil Castle

Dec 06, 2012 at 15:01

Whilst i am pleased at this news, if I was Capita, HSBC and BNY Mellon, I would be pretty p'd off having agreed a deal with the FSA to then have to do a second deal with the treasury.

It is a bit like the recently announced FSA Fines being redircted by the Treasury, i.e. proof that the FSA IS part of the Treasury and hence this is just indirect taxation.

all those Govt job custs and savings and all that happens is the employees are offloaded to quangos, the salaries go up and the accountability dissapears.

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Stratfield

Dec 06, 2012 at 20:13

Ned K is right, the biggest stink has yet to hit the nostrils. Oh for some investigative journalism.....

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Nik Proctor

Dec 07, 2012 at 11:44

Why is honesty and fairness such an reasonable outcome from this saga?

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miles jon

Dec 07, 2012 at 11:55

If the new fund manager Spear Point has brought high court actions against various parties for alleged lack of due diligence, execution and mismanagement, including the former manager Arch totalling some £330 million, why after this damning citing and censure by the FSA of Capita Financial Management are Capita not being sued?

Surely it is now clear that the IFA sector had nothing to do with the failure of these funds. This is effectively what the FSA censure is saying isn't it?

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Alan Smith

Dec 07, 2012 at 16:42

@ miles jon

It is not Spearpoint who are taking Arch Financial Products LLP to court but the new board of the Guernsey I.C Ltd companies whose chairman is Hugh Aldous. Hugh Aldous is still a CAPITA official and as the link below shows was chairman of Capita Financial Group’s specialist fund division.

http://www.capitafinancial.com/files/Mithras-final-version.pdf

You really have to laugh at the irony at Bernie Boylan’s comment about CFM understanding the complexities of the Mithras Investment Trust which invests in Private Equities, as by May 2009 when CFM were appointed by Mithras the CF Arch Cru funds were already suspended and the FSA’s ARROW visit in October 2008 had found the complete lack of systems for the 231 funds that CFM were ACD of that resulted in the very delayed Final Notice issued against CFM on the 26th November.

Indeed you could question why the FSA allowed Mithras to appoint Capita Financial given the FSA knew of CFM’s failings at that time. However if you were to ask the FSA any question regarding Capita you will not be given any answer as the FSA have shown in the CF Arch Cru case and others that Capita are bulletproof.

Log onto the FSA website and on the main page in the top right hand corner there is a link on news about firms with CF Arch Cru a specific link. Click on this and there is no mention of the Final Notice against Capita Financial Managers – Why not ? I would have thought the information was very relevant for investors. What is also rather strange is the Final Notice against CAPITA was issued on 13th November but was not released until 26th! Virtually every other Final Notice is published on the FSA’s site and released to press the day after the notice is issued, why give Capita a fortnight to get their PR lobbyists prepare to lessen impact of news.

More worryingly why did it take over 4 years from the FSA’s ARROW visit in October 2008 when the failures of CFML’s management systems, procedures and controls were discovered until November 2012 to issue this notice? After all the failures at CFML had been ongoing for 2 years from 2006 (possibly longer) and the failures were on over 200 funds and CAPITA had not spotted these errors.

Compare this to UBS who noticed immediately themselves in September 2011 that unauthorised trades had taken place for a 4 month period between June and September 2011 and altered systems accordingly, these system errors lost no investor money yet in just over a year from UBS informing the FSA of its errors the FSA issued Final Notice and fined them £29 million.

However, nobody should be surprised about the FSA’s cosy relationship with CAPITA as it has happened before. I have looked at the link detailed by @Ned K http://www.connaughtactiongroup.com

and the link to will C(r)apita take the rap. The minutes of Capita’s meeting with Connaught Asset Management on 16th September 2009 would certainly indicate Capita knew that the Connaught Fund was going to implode in the future. Having never recommended the Connaught fund I have no idea whether in September 2009 investors were informed directly of CAPITA’S concerns and given the opportunity to exit the fund as was proposed by John Peppitt at the meeting , but given the numbers of investors caught out and the articles on the action group website I would doubt it.

No doubt CAPITA were allowed to give Blue Gate Capital a hospital pass as the FSA had mucked up in allowing CAPITA to market the fund in the first instance as individuals connected with Connaught Asset Management had connections with UKLI Ltd. Although the FSA eventually took action to close UKLI Ltd the UK’s largest illegal land banking scheme in June 2008, the FSA would have been made aware by Moore Stephens accountants of the links between UKLI and Connaught Asset Management as detailed in Moore Stephens resignation letter

http://www.moneyweb.co.za/mw/action/media/downloadFile?media_fileid=987

as well as correspondence received from Business Opportunity Watch

http://www.businessopportunitywatch.com/BOW-Review-of-UK-Land-Investments-Group2.htm#bowl

Given the close relationship that CAPITA has with both the Labour and Conservative Parties and the FSA is answerable to no one then CAPITA and the FSA can go along like bungling idiots allowing one investment disaster after another to occur and others have to pay for their mistakes.

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