In a move that appears to have raised a few hackles amongst the IFAs, the City’s financial watchdog, the FSA, has asked those advisers that might have had liability in respect to the failure of CF Arch Cru Ltd to provide details of their professional indemnity insurance policies.
The chartered financial planner from O’Halloran and Co in Lincoln, Terence O’Halloran commented that he thought that the FSA might be trying to start up a customer redress scheme by using money from advisers.
The controversy appears to have been fuelled by a letter which has been sent out by the FSA on the 6th January to selected advisers asking them to show evidence of their PI insurance policies that cover for them for liability with respect to the CF Arch Cru affair. The FSA has also asked for these firms to provide copies of any former policy that they might have if the current policy was not valid at the time of the collapse of the funds manager.
Mr O’Halloran seems to think that the FSA does not have the funds to distribute of its own and presumably the 52 million pound compensation package which had been announced after the collapse was insufficient. He went on to speculate that the FSA was trying to make advisers pay for the mistakes that the watchdog was responsible for itself. He said that the cost to advisers of finding all the relevant information in such a short time is enormous.
The letter from the FSA contains a request from Mr James Barcroft, who works in the supervisory division at the authority, to advisers to retain sufficient funds to cover any liability which they are subsequently found to be responsible for with respect to advice given about the sale of CF Arch Cru funds. The investigation into the collapse of the funds manager is currently ongoing.
The letter is apparently a follow up to another letter sent out in mid December last year and, according to a spokesperson at the FSA, an “information gathering” exercise. The spokesperson refused to provide any more information when asked if it was intended to help provide funds for a customer redress scheme.
The letter distributed on the 6th January requests information about liability insurance details to be forwarded by the 13th January at the latest, giving the firms involved a maximum of a week to comply.