Capita Financial Managers has provided 1,600 names of investors for group litigation order.
Advisers may be thrown an Arch Cru lifeline if Capita Financial Managers, Arch Cru’s former authorised corporate director, is found guilty of causing losses to investors as a result of a fresh £16m court claim being brought on behalf of 550 investors.
Law firm Harcus Sinclair said its group litigation order on behalf of the investors against Capita was approved on 1 November. The combined £16m claim is from investors who are seeking compensation over Arch Cru.
According to Damon Parker, partner at Harcus Sinclair, Capita has passed over to the law firm names of 1,600 investors who have not entered any redress scheme and also the names of 100 nominees, trustees and product providers that have clients invested in Arch Cru, “who stand between us and the real investor”.
The claims will argue that investors lost money as a result of Capita breaching regulations around collective investments.
The group litigation order, filed in the High Court of Justice and seen by FTAdviser, says that CFM has until 13 December to file a defence.
A spokesperson for Capita said: “Any claims made against Capita Financial Managers will be vigorously defended and any such defence will be lodged through the appropriate channels at the relevant time.”
Mr Parker told FTAdviser that if the litigation order is successful, this could have implications for advisers.
He said: “No doubt, if we are successful in establishing liability, advisers would point to the judgment and say ‘how the hell were we supposed to know that’.
“But they are not my clients, and whether CFM performed its functions as ACD properly is a different question from whether advisers gave correct advice. If advisers think that Capita is responsible for their losses, it is open to them to take advice from their own lawyers on whether they have claims under the Civil Liability (Contribution) Act 1978.”
Mr Parker added that one aspect which works in investors’ favour is the regulator’s final notice, issued in November 2012 against CFM, which states that the firm failed to adhere to certain aspects of the Collective Investment Scheme Sourcebook.
The final notice revealed that Capita failed to ensure it had sufficient processes and procedures in relation to the appointment of its investment manager delegate to the fund and failed to adequately monitor the liquidity of the funds and consider what implications such liquidity might have, amongst others.
He said: “Capita agreed with what the FSA said in the final notice so it would be difficult to deny what the FSA said.”
Mr Parker said the total cost of the case, if it did go to court, would depend on many factors but would cost at least £2m.
He continued that if it went to court the details of the Arrow visit that was carried out by the FSA prior to the funds being suspended in March 2009 would finally be unveiled.
Loading...