Financial advisers who gave poor advice to clients over high-risk unsuitable investments have started sending out millions of pounds of compensation cheques to clients.
So far, £8.26 million has been paid out – but the final figure is likely to add up to at least £31.47 million, according to consumer watchdog and regulator the Financial Conduct Authority (FCA).
The compensation covers nearly 3,000 sales by financial advisers promoting CF Arch cru Investment and Diversified funds (Arch cru).
The funds were dubbed high-risk by the FCA, meaning they should only have been sold to sophisticated investors who understood the risks involved in the deals.
The funds were invested in non-mainstream assets such as private equity, private finance and commodities.
High risk investments
The FCA decided too many consumers were not told about the potential to lose their money and were missold the investments.
In a major misselling inquiry, the FCA demanded more than 350 financial firms should write to their customers involved in Arch cru telling them that compensation was available.
Out of 7,500 customers, half replied and 85% of them were found to have been wrongly sold the investments.
Clive Adamson, director of supervision at the FCA, said: “The vast majority of firms have co-operated with us, helping ensure that this compensation scheme has progressed as smoothly as possible. We’re now seeing compensation flow to those investors who were missold. We will continue to monitor progress to ensure consumers affected by Arch cru receive redress as quickly as possible.”
The Arch cru case is the first time the FCA has ordered a mass compensation pay out.
Warnings about bogus advisers
The FCA has also issued these warnings about bogus firms posing as regulated financial advisers:
- Nova Portfolio Management (clone)
- Al Reen Capital (falsely purporting to be authorised by the FCA)
- FE Wealth Management (clone)
Dealing with an unregulated firm
If you buy shares, save money or invest with an unregulated firm, you lose any protection offered by the Financial Ombudsman and the Financial Services Compensation Scheme. Broadly, you have no independent place to complain if the deal goes wrong and are unlikely to win any compensation
Checking if a firm is regulated
Go to the Financial Services Register to check if a firm is regulated in the UK.
Reporting a suspected bogus adviser
Find out how to report unauthorised advisers on the FCA web site
