The FSA has prohibited Danner, who was closely involved with the establishment and marketing of the CF Arch cru range of funds, from holding a role at any regulated financial services firm again.
But this will come as scant recompense for some investors who are unlikely to ever make back the full losses incurred when the Arch cru funds were suspended in 2009. Advisers forced by the FSA to write to clients that were invested in the funds by the end of April offering them a review of their case, will also find the pill hard to swallow.
While there is a £54m compensation scheme backed by Capita, BNY Mellon and HSBC for their involvement in supporting the funds, it is estimated by Capita that it will only help investors recover on average 62% of the published net asset value of the funds at the date of suspension.
Mis-selling scandal
On top of this there is a consumer redress scheme for investors who feel they were mis-sold by their advisers, which requires intermediaries to contact all clients who invested in the funds asking if they want their case reviewed.
If it is deemed the client received unsuitable advice then the adviser firm must put them back to the position they would have been in had they received suitable advice. In some cases this could see advisers paying out six-figure sums.
But if the advice was not unsuitable (ie the investor was informed the investment was high risk and this fitted with their profile) the only compensation investors can claim for except going through the Financial Ombudsmen Service, is from Capita et al.
In cases where investors put six-figure sums into the funds and the advice was deemed suitable, they could fail to recoup the bulk of their losses. This is because the £54m Capita payment scheme will be divided proportionally depending on how much each investor lost.
Danner’s ‘financial hardship’
The FSA said had it not been for verifiable evidence of serious financial hardship it would have fined Danner £90,000.
In addition to his role in setting up the funds, during his time as a director of SD Asset Management (SDAM), a small IFA firm based in Cardiff, 390 of SDAM’s clients were advised to invest £39m in Arch cru funds. Danner earned £55,000 from SDAM and £553,000 from Arch cru.
The FSA’s final notice to Danner was sent on 4 March and said he had breached statements of Principles 1, 2 and 7.
Namely: failing to act with integrity in carrying out his controlled functions; failure to act with due skill, care and diligence in carrying out his controlled function; and finally, failure to ensure SDAM complied with the relevant requirements and standards of the regulatory regime.
The regulator relied on findings from the Upper Tribunal in its decision from June 2012, which related to the FSA’s decision not to approve an application for Danner to perform a CF30 (customer) role at another IFA firm.
‘Poor ethical compass’
Specifically, the Upper Tribunal said in its judgment that Danner demonstrated “such a poorly directed ethical compass as to amount to a lack of integrity on his part”.
Tracey McDermott, the FSA’s director of enforcement and financial crime, said: “Danner’s failures were comprehensive. He both failed to understand or act upon either his personal duty to his customers or his obligations as principal to a number of Appointed Representatives. Even when the seriousness of his shortcomings was plain to see, Danner failed to put the problems right – despite others drawing them to his attention.
“This case graphically illustrates the consequences of failing to engage with the responsibility of being an approved person.”
