This article was originally published in The Financial Times
Court to hear Arch Cru case
By Tanjil Rashid
The Arch Cru fund range was suspended in March 2009 by the Financial Services Authority. Capita was publicly censured by the FSA for its failures in managing the fund, and in 2012 the FSA brokered a corporate redress scheme, where investors could recoup about 60 per cent of their investment from Capita.
The legal action is being brought by investors who refused to sign up to the redress scheme. Those who intend to accept it have until December 31 to do so, and waive the right to further legal claims.
At the time, it had as many as 15,000 investors and was worth £364m. After the fund’s suspension, most of its assets were sold at a heavy discount, and the rump of the fund now valued at only £66m. Arch Cru investments were marketed as being safe and low-risk, but in fact investors’ money had gone into highly illiquid venture capital and private equity assets.
The FSA judged that Capita had no responsibility for the fund’s underlying investments, but the investors are now arguing that Capita owed them a common law duty of care to safeguard their money. The Financial Conduct Authority, the successor to the FSA, is forcing advisers who recommended Arch Cru investments to contact investors and inform them of the litigation action.
Should the claim prove successful, it may pave the way for further claims on behalf of investors who lost their money in investment funds that were similarly mis-sold.