Firms that advised customers to invest in the CF Arch cru Investment and Diversified funds will have to contact those investors from 1 April 2013 to find out whether they want their investment reviewed.
The reviews will look at whether investors were mis-sold the funds and are entitled to compensation. Where compensation is owed it will put the investor in the position they would have been in had they received suitable advice.
The funds were high-risk products that typically invested in non-mainstream assets such as private equity, private finance and commodities. Advisers should only have recommended the funds to investors who fully understood - and were willing to accept - the risks.
However, we found the funds were unsuitably sold to some investors as low or medium risk products.
This is the first time we have used our powers to implement a compensation scheme of this type.
How to have your investment reviewed
Advisers have one month from 1 April 2013 to contact their customers that invested in the funds, to ask if they want their investment reviewed.
Investors will only have to fill in a short form to confirm they want a review.
Advisers then have until 9 December 2013 to let investors know the outcome of the review and whether they are entitled to compensation.
Consumer redress and payment schemes
The consumer redress scheme complements the CF Arch cru payment scheme that was announced on 21 June 2011. The £54m payment scheme is made up of voluntary contributions from three key parties involved in administering the funds; Capita Financial Managers Limited (Capita), BNY Mellon Trust & Depositary (UK) Limited (BNYM T&D) and HSBC Bank plc (HSBC).
The amount of compensation paid to any investors by advisers will reflect the current value of the funds and subtract the amount an investor is eligible to claim from the Capita payment scheme.
Capita has written to all investors on the register of shareholders with details of the payment scheme and how much they will be offered. In most cases, investors have until 31 December 2013 to accept this offer.
In accepting the offer, investors will give up certain rights to make claims against the three firms contributing to the payment scheme, so investors should carefully consider the terms of their offer.
Investors that have an interest in the funds but hold their shares through another company, like a stockbroker or fund manager, should contact that company about any offer from the payment scheme.
Capita's website[1] has further information about the payment scheme (enter the ’Investor Services‘ section, go to ‘Investor Communications‘ and click on ’CF Arch cru fund suspensions‘) or you can call Capita on 0845 608 0958 (+44 20 3367 8275 from overseas).
Investors still have the right to complain about the way they were sold the funds, even if they choose not to ask for a review under this scheme. However, investors should be aware that time limits apply for making a complaint to a firm or taking legal action through the courts.
Further information
The two funds were UK open-ended investment companies, authorised and regulated by us. These funds invested in a series of Guernsey-domiciled investment companies listed on the Channel Islands Stock Exchange.
We amended the regulatory permissions of Capita, BNYM T&D and HSBC on 31 August 2011, so the Financial Ombudsman Service (FOS) has to follow the rules of the payment scheme when assessing complaints about the funds against these firms.