Latest news and FAQs for CF Arch cru investors

The CF Arch cru Investment and Diversified funds were two UK open-ended investment companies authorised and regulated by us. These funds invested in a series of Guernsey-domiciled investments listed on the Channel Islands Stock Exchange, and were run by an investment manager, Arch Financial Products LLP.

Capita Financial Managers Limited (Capita) was the Authorised Corporate Director and BNY Mellon Trust & Depositary (UK) Limited (BNYM T&D) and HSBC Bank plc (HSBC) held the funds.

The funds were suspended by Capita on 13 March 2009 and are currently being wound up.

Investors in the CF Arch cru funds will receive letters from their advisers by 29 April 2013 asking if they want their case reviewed. The review will look at whether the investor was mis-sold the funds and is entitled to compensation.

This is the first time we have used our powers to implement a compensation scheme of this type.

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.

The reviews will look at whether investors were mis-sold the funds and are entitled to compensation.

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.

Find out more about the compensation scheme and the Payment Scheme[1]. Investors may also contact our Consumer Helpline[2] for further information.

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.

If you would like the firm to review the advice you received, you must let them know by 22 July 2013.

If you tell the firm you would like it to review the advice you received, it has to write to you by 9 December 2013 to tell you whether the original advice was suitable for you.

If you do not ask for a review of the way you were sold the funds by 22 July 2013, you can still complain to the firm about the advice you received.

However, there are time limits for making such a complaint and you risk being unable to claim compensation from your adviser if you delay.

If you do not receive a letter from the firm by 29 April 2013, contact us on 0856 606 1234.

We will follow this up with the firm and might advise you to complain to the firm.

If you complain to the firm and do not receive a response within eight weeks, you can refer it to the Financial Ombudsman Service (FOS)[3].

The FOS will then apply the rules of the consumer redress scheme to your case.

The firm may contact you to ask for information to help it review the advice it provided to you or to help it calculate the amount of compensation you will receive.

You should send the information as soon as possible so the firm can complete the review and possibly pay you compensation.

You should contact the firm to let it know you are not able to provide the information it has asked for.

If the advice you received was unsuitable, the firm must put you in the position you would have been in if you had received suitable advice.

Firms will subtract the current value of the funds and the amount you may be eligible to receive from the payment scheme (see below) from the compensation payment.

The firm will deduct the amount you are eligible to receive from the payment scheme from any compensation payment, regardless of whether or not you have accepted and received it.

This is because we believe that investors are responsible for making their own decisions about the payment scheme and firms should not face financial consequences where their customers choose not to make a claim.

If you would like to accept the firm’s offer, you will need to respond to the firm within six months of the date of the letter and explain how you would like the compensation to be paid.

The firm must pay the compensation to you within 28 days of receiving your response.

If you disagree with the firm’s calculation – for example, if you think the comparable suitable investment the firm used was not appropriate – you can refer your case to the FOS.

If you are not satisfied with the outcome of the review you can refer your case to the FOS. However, you must do this within six months of the date of the firm’s letter.

The FOS will review your case and determine whether or not the firm applied the rules of the consumer redress scheme correctly.

If the firm that gave you the advice no longer exists or is in default, you can contact the Financial Services Compensation Scheme (FSCS)[4], which will consider whether you are due compensation.

Find out more about the consumer redress scheme and the payment scheme[2]. Investors may also contact our Consumer Helpline[3] for further information.

We, along with Capita, BNYM T&D and HSBC announced on 21 June 2011 that a voluntary scheme would be used to make payments to eligible investors in the CF Arch cru funds, and help return a substantial part of their investment to them.

The key features of the payment scheme are that:

•  up to £54m will be paid to investors;
•  investors will be sent individual payment offers by Capita – other than in exceptional cases, they have until 31 December 2013 to accept the offer (all parties have agreed to extend the scheme from its previous deadline of 31 December 2012);
•  the payment scheme will give money back to investors for losses they suffered between suspension of the funds on 13 March 2009 and 31 May 2011; and
• Capita estimate that, as at 30 June 2012, the payment scheme and other distributions could help investors recover on average of 62% of the published net asset value of the funds as at the date of suspension. The final value may go up or down as further realisations of the funds are made.

Broadly, this will be investors in the CF Arch cru funds as at 31 May 2011 and who still held their investment as at 31 August 2011, although there are some exceptions for those who have transferred their shareholdings. We understand there were more than 6,000 investors on the register of shareholders on 31 August 2011.

The payment scheme is only available to investors in the funds, and not the IFAs who sold the funds.

Investors who withdrew their money from the CF Arch cru funds before 31 May 2011 will not be able to make a claim.

The FOS must follow the payment scheme for assessing any complaints about the three firms that have contributed to the scheme.

We believe it was appropriate in this case to bring into line the FOS’s decision-making with the payment scheme’s rules as this is a complex situation involving many parties. We also wanted speed and consistency in how investors were treated.

There were two legal challenges, both by judicial review, of our decision to make the FOS follow rules set out in the payment scheme. The High Court rejected both of these challenges.  Investors’ ability to accept an offer from the payment scheme is unaffected by the Court’s rejection of these two challenges.

One of the challenges was made by Coull Money Limited, an independent financial adviser. The other was made by a group of investors represented by Regulatory Legal Solicitors.

If an investor received an offer letter in October 2011 then this period will now have lapsed.

There are three different options available to investors, as explained below. Investors should seek independent financial and/or legal advice before deciding whether or not to accept the offer.

Accepting the offer from the payment scheme

Capita has written to all eligible investors to explain how much they will be offered under the payment scheme. In most cases, investors have until 31 December 2013 to accept this offer.

If an investor accepts the offer it will be in full and final settlement of any claims they may consider against Capita, BNYM T&D and HSBC. This means that investors would not be able to pursue claims against these three firms via the courts or the FOS.

Investors who accept the offer will still have the right to make claims against other firms. For example, if investors believe they were mis-sold the funds they can get the firm who advised them to buy the funds to review their investment. The review would look at whether the investor was mis-sold the funds and is entitled to compensation.

Find out more about the consumer redress scheme[6]. 

Pursuing a claim via the Financial Ombudsman Service or the courts

If investors do not accept the payment scheme offer they can pursue their own claims. For example, they can complain to the FOS or bring a claim in the courts.

If an investor wants to make a complaint to the FOS against any of the contributing firms they must do so within six months of the date of the letter attached to their offer under the payment scheme.

Pursuing a claim against other firms

Investors who feel they were mis-sold the funds can get the firm that advised them, such as their financial adviser or fund manager, to review the advice to invest in the funds. The review would look at whether the investor was mis-sold the funds and is entitled to compensation.

This can occur whether or not an investor accepts the offer under the payment scheme.

Find out more about the consumer redress scheme and payment scheme[8].

Investors that accept the offer under the payment scheme will be paid within six weeks of Capita receiving their correctly completed application.

We believe the payment scheme provides a quick, certain and cost-effective way for investors to get their money back from the firms who have contributed.

This is a complex situation involving many parties and we wanted speed and consistency in the treatment of investors.

The alternative routes for investors, including court action, could be expensive, lengthy and stressful. The payment scheme helps prevent these issues, but ultimately each investor must decide for themselves whether or not to accept their offer.

If an investor does not accept their offer under the payment scheme they can pursue their own claims against the three firms, either via the FOS or the courts. Investors can also pursue claims against other firms, whether or not they accept the offer under the payment scheme.

Capita wrote to all investors on the register of shareholders with details of the payment scheme on 31 August 2011.

Capita has now also written to these investors explaining how much they will be offered under the payment scheme.

In most cases, investors have until 31 December 2013 to accept this offer.

Individual packages have been decided by calculating the total losses made by all investors in the CF Arch cru funds since suspension on 13 March 2009 to 31 May 2011, and then dividing the £54m payment scheme proportionately between investors depending on how much they lost.

Capita has written to investors to tell each one how much they will be offered under the payment scheme. In most cases, investors have until 31 December 2013 to accept this offer.

Capita estimate that, as at 30 June 2012, the payment scheme and other distributions could help investors recover on average of 62% of the published net asset value of the funds as at the date of suspension. This final value may go up or down as further realisations of the funds are made.

You can get further information about the payment scheme on Capita's website[-1]  (see the ’Investor Services‘ section, go to ‘Investor Communications‘ and click on ’CF Arch cru fund suspensions‘) or by calling Capita on 0845 608 0958 (+44 20 3367 8275 from overseas).

Investors who have an interest in the CF Arch cru funds but hold their shares through another company should contact that company about any offer from the payment scheme.

Investors may also contact our Consumer Helpline[7] for further information.

Investors that have an interest in the CF Arch cru funds but hold their shares through another company, such as a stockbroker or fund manager, will be contacted by the company holding their shares.

.A number of firms that advised their clients to invest in the CF Arch cru funds have since defaulted, ie. failed, because they were unable to meet claims against them.

Investors who believe they were mis-sold the funds by a firm that has since defaulted should approach the Financial Services Compensation Scheme (FSCS)[5].

You can find out more about how the FSCS works[-1].

There were two legal challenges, both by judicial review, of our decision to make the FOS follow rules set out in the payment scheme. The High Court rejected both of these challenges. Investors’ ability to accept an offer from the payment scheme is unaffected by the Court’s rejection of these two challenges.

One of the challenges was made by Coull Money Limited, an independent financial adviser. The other was made by a group of investors represented by Regulatory Legal Solicitors.

If investors accept (or have already accepted) their offer under the payment scheme, Capita, BNYM T&D and HSBC are bound by the terms of it. This means investors would not be able to make any further claim against Capita, BNYM T&D or HSBC but can make claims against any other parties.

The FOS must follow the payment scheme for assessing any complaints about the three firms that have contributed to the scheme.

If an investor wants to make a complaint to the FOS against any of the contributing firms they must do so within six months of the date of the letter attached to their offer under the payment scheme.

The time limit for accepting an offer under the payment scheme still applies, so investors have until 31 December 2013 to accept an offer under the scheme.

Find out more about the compensation scheme and the payment scheme[9]. Investors may also contact our Consumer Helpline[11] for further information.