FSA Arch cru adviser investigation underway

The FSA is carrying out an investigation into advisers who recommended Arch cru funds and has written to firms asking for further details about their Arch cru sales.

In a letter to advisers, sent yesterday, the regulator says it is looking into sales involving the CF Arch cru Investment Portfolio fund, the CF Arch cru Specialist Portfolio fund, the CF Arch cru Balanced fund, the CF Arch cru Global Growth fund, the CF Arch cru Income fund and the CF Arch cru Finance fund.

The investigation spans CF Arch cru fund sales to retail investors between July 2006 and March 2009, and includes advised sales, discretionary sales, or sales on a mixed basis.

Firms have been told to provide the FSA with basic details about their Arch cru sales, including the date of investment, the fund name, the client name, and the amount invested. Firms will also have to specify on what basis the funds were recommended.

The letter, dated December 13, gives advisers until 2pm on December 19 to provide the requested information.

The letter says: “We are not asking you to forward us individual client files at this time but we will be writing to you next week to require you to do so. Therefore please begin preparing the client files for any Arch Cru sales in anticipation of this request.

“We may also request further additional information with respect to your firm’s sales of CF Arch cru funds such as your due diligence.”

At a closed meeting with MPs last month Margaret Cole, conduct of business unit managing director at the FSA, said 900 IFAs were involved in recommending Arch cru. It is estimated that over half of the 140 firms who accounted for the majority of Arch cru sales are no longer trading.

An FSA spokeswoman says: “This is further work that we are doing looking into the firms that sold these products. This is part our supervisory work where we write to firms and I cannot comment further at this stage.”

Pressure group Justice in Financial Services and law firm Regulatory Legal have each filed for a judicial review of the £54m compensation package agreed by the FSA between v, Capita Financial Managers and HSBC in June. Joe Egerton, JFS spokesman, says the letters look like the start of a consumer redress scheme, a move he says he will challenge.

In November, the Financial Ombudsman Service provisionally upheld a complaint against an IFA who recommended clients to invest in Arch cru, and ordered the adviser to pay redress.

Gareth Fatchett, partner at Regulatory Legal, says: “The FSA is clearly going to review the advice in the light of the provisional decision issued by the FOS recently.”