£31m in compensation to be paid out following FCA’s Arch cru consumer redress scheme

Compensation has begun to be paid by financial advisers to people who invested in the CF Arch cru Investment and Diversified funds (Arch cru) as a result of unsuitable advice. Over £8.26m has so far been received by consumers.

Total redress due under the scheme is calculated to be £31.47m. In December 2012, it was estimated that the compensation package would deliver between £30m-£40m for affected investors. The money paid out under the scheme, which was overseen by the Financial Conduct Authority (FCA), is in addition to any redress investors may have received under a separate process administered by Capita Financial Managers.

Clive Adamson, director of supervision at the FCA, said of the progress to date:

"The vast majority of firms have co-operated with us, helping ensure that this compensation scheme has progressed as smoothly as possible. We’re now seeing compensation flow to those investors who were mis-sold. We will continue to monitor progress to ensure consumers affected by Arch cru receive redress as quickly as possible."

Under the consumer redress scheme 3,414 sales have been reviewed by firms and 85.4% of these have been found to be unsuitable. This is consistent with the results of a review undertaken by the FCA before the consumer redress scheme was set-up.

Arch cru funds were high-risk products that typically invested in non-mainstream assets such as private equity and private finance. Advisers should only have recommended the funds to investors who fully understood - and were willing to accept - the risks.

However, the regulator found the funds were unsuitably sold to some investors as low or medium risk products. The FCA, and its predecessor, stepped in to ensure affected investors received redress, in line with its objective to secure an appropriate degree of protection for consumers.

In December 2012, it was predicted that up to 30% of affected investors would sign up to be considered for compensation. In July 2013, 353 firms informed the FCA that they had clients who qualified under the scheme. Letters were then sent every one of the 7,124 affected investors inviting them to opt-in, 47.8% chose to do so (totalling 3,405 investors). 

Firms had until 9th December 2013 to review the advice for these clients and submit their assessments to the FCA for redress to be calculated where appropriate.

Notes for editors

  1. Further information on Arch cru.
  2. Answers to frequently asked questions on Arch cru.
  3. Policy Statement including estimates of the redress scheme.
  4. On the 1 April 2013 the Financial Conduct Authority (FCA) became responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA).
  5. The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has three operational objectives: to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers.
  6. Find out more information about the FCA.