The FCA has censured Catalyst Investment Group Limited (Catalyst) for recklessly misleading investors when promoting bonds offered by ARM Asset Backed Securities (ARM) in breach of Principles 1 and 7 of the FCA’s Principles for Businesses.

The FCA fined Catalyst’s former compliance officer, Alison Moran, £20,000 for failing to act with due skill, care and diligence in breach of Principle 6 of the statements of principle for approved persons.

Between November 2007 and May 2010, Catalyst was the primary distributor of ARM bonds in the UK. ARM bonds were structured products issued by a Luxembourg entity, ARM, the underlying assets of which are senior life policy settlements purchased in the US. ARM applied for a licence to issue the bonds from the Luxembourg financial regulator, the Commission de Surveillance du Secteur Financier, and pending a decision, ARM had been asked to stop issuing bonds.

Catalyst was aware of this but continued to accept funds from investors without disclosing ARM’s position, or the risk that ARM could be liquidated if its licence application failed.

This should have been included in Catalyst’s marketing material for ARM bonds. The compliance officer was aware of the issues with ARM’s licence and failed to ensure this was properly communicated to investors.

The FCA has also issued decision notices against the chief executive and former director of Catalyst, imposing a fine of £450,000 and £100,000 respectively. These cases have been referred to the Upper Tribunal.

Copies of Catalyst’s final notice; Ms Moran’s final notice; and the related FCA press release are available.

http://www.fca.org.uk/static/documents/final-notices/catalyst-investment-group-limited.pdf
http://www.fca.org.uk/static/documents/final-notices/alison-moran.pdf
http://www.fca.org.uk/news/catalyst-investment-group-limited