Does A Fund's ACD really matter?
In the matter of Arch cru and the role of Capita Financial Managers Limited as the Authorised Corporate Director (ACD) of the funds, things had gone a bit quiet. But to update you, the Group Litigation Order, discussed frequently around a year ago, and dismissed by some at the time as ‘pie in the sky’ and ‘posturing with no legal basis’ is in fact happening.
The court granted permission for the group litigation to take place, a process intended to avoid vexatious claims, which tells you something about the matters under review. Around 1,000 investors are claiming that their investment losses are attributable to the ACD’s failings in the administration and compliance of the various UK authorised Arch cru funds, as set out comprehensively in the FSA’s Final Notice of November 2012.
This week news has emerged of a result from a mediation process which was due to complete in June (June last year that is) in which Moore Stephens, auditors to the funds has agreed to pay an undisclosed sum to the funds by way of an out of court settlement. In passing, it is shameful that, given the FCA’s new passion for publicising regulatory offenders and their offences, these negotiations between ‘interested parties’ (including the original Capita Payment Scheme) are allowed to carry on behind closed doors, in secret, with no independent oversight, no disclosure and no transparency.
And now we hear that Capital Financial Managers Limited plans on joining advisers as defendants in the claim against Capita. If you ever thought that Arch cru was nothing to do with you, this strategy by an ACD managing £20bn, including a significant stable of funds managed by retail fund managers regularly employed by financial advisers, really should worry every adviser.
A firm, paid by a fund manager, to undertake compliance and administrative duties in relation to UK authorised retail investments, makes mistakes. When pursued for losses they suggest that the advisers are also culpable for not noticing the mistakes or believing erroneous statements and materials.
Some investment managers, when mistakes are uncovered, pay their fines and put investors right. Invesco Perpetual did. Standard life Investments did. A firm which gets things wrong and then blames advisers who ‘should have known’ should give every adviser (and their PI insurer) cause for concern. Who knows, the identity of a fund’s ACD might even become a critical factor in fund due diligence if you’re simply not prepared to take the risk?