Arch cru gets politically battered

Arch cru was subject to a political discussion this morning, with MPs discussing the issues in a Westminster Hall debate.

Despite several calls for a public inquiry into what went wrong with the troubled funds, Treasury financial secretary Mark Hoban rejected this course of action.

There were also calls for an investigation into the regulatory failures in preventing the collapse of Arch cru and the role played by Capita as authorised corporate director of the funds.

Investors in the collapsed funds have been offered a compensation package. This was agreed by the FSA in June this year and involves Capita, BNY Mellon and HSBC Bank. Hoban confirmed that he feels this £54m compensation package is fair as it reflects the level of responsibility of these three institutions.

By rejecting calls for a public inquiry, the Treasury is enabling investors to recover some of their losses sooner than would otherwise have been possible. It is believed that an inquiry would have delayed the processing of the agreed compensation package.

Hoban also pointed out that other parties are responsible for what went wrong with Arch cru. This naturally includes those IFAs who felt it appropriate to recommend Arch cru funds to their clients.

IFAs who sold Arch cru funds have to accept a share of the responsibility for what went wrong, if it can be demonstrated that their recommendations were unsuitable for individual investors.

We do not believe that every recommendation to invest in Arch cru was unsuitable, although it is likely that many of these recommendations were not up to the standards required of IFAs. Private equity and private finance are rarely ever suitable asset classes for retail investors.

Whilst the Treasury appears to be shutting the door on an inquiry today, the Arch cru debacle is far from over.

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