Wealth Manager - the site for professional investment managers

Register to get unlimited access to Citywire’s fund manager database. Registration is free and only takes a minute.

FSA censures Capita Financial Managers for Arch cru failings

1 Comment
FSA censures Capita Financial Managers for Arch cru failings

The Financial Services Authority (FSA) has issued a public censure against Capita Financial Managers Limited (CFM) for its failings in relation to the CF Arch cru funds.

CFM is the authorised corporate director of the CF Arch cru funds, a role which the FSA said carries ‘important regulatory responsibilities for the protection and fair treatment of investors.’

However, in July 2006, CFM delegated the investment management of the funds to a third party – Arch Financial Products.

These funds were then invested indirectly in private finance and private equity assets.

Although CFM delegated the investment management to Arch, it still remained responsible for the regulatory obligations.

The FSA said: ‘CFM failed in aspects of its oversight of Arch. CFM did not have sufficient processes in place to monitor Arch, even though Arch had not acted as an investment manager before.

‘CFM did not adequately identify and mitigate the conflicts of interest between Arch and the funds that arose as a result of the CF Arch cru structure, which involved a complex network of onshore and offshore companies and private market investments.’

The watchdog said CFM also failed to monitor the liquidity risks of the funds. The funds were then suspended in March 2009 as a result of concerns that there was insufficient liquidity.

Furthermore, once the funds were suspended, it became clear that their investments were not in fact as valuable as CFM had understood them to be.

A £54 million payment scheme was voluntarily established in June 2011 by CFM, Bank of New York Mellon Trust and Depositary and HSBC Bank for investors.

CFM required the financial support of its ultimate parent, Capita Group plc, to make its £32 million contribution to that payment scheme. 

However, CFM could not fund both such a substantial contribution to the payment scheme and a financial penalty. This was taken into account in the FSA’s decision not to impose a financial penalty on CFM. 

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.
Citywire TV
Play Mark Barnett - part 2: why I'm not buying Lloyds

Mark Barnett - part 2: why I'm not buying Lloyds

In the second part of our exclusive video interview, Barnett explains why he has no intention of buying Lloyds, and where he sees the greatest income opportunities.

Play Wealth managers reveal the best investment ideas of the year

Wealth managers reveal the best investment ideas of the year

From robotics to impact investing, wealth managers share the best ideas they have heard this year.

Play Baillie Gifford's Earnshaw on Xi Jinping's 'new era'

Baillie Gifford's Earnshaw on Xi Jinping's 'new era'

Sophie Earnshaw talks through what Xi Jinping's 'new era' means for investors. and why Chinese tech offers some of best growth stocks in the world.

Read More
Your Business: Cover Star Club

Profile: JM Finn on why the future is with financial planners

Profile: JM Finn on why the future is with financial planners

There is a lot of work on pension consolidation and Sipps have been a big driver there, says JM Finn chief executive

Wealth Manager on Twitter