An independent review into the collapsed Connaught Income Fund Series 1 will scrutinise the regulators’ approach and response to intelligence it received about the investment firm, the Financial Conduct Authority confirmed on Friday.
Share of the blame
The investigation will consider the “proportionality, appropriateness and effectiveness” of the actions taken by the Financial Services Authority (FSA) and its successor the FCA when supervising three companies involved with Connaught.
The fund provided short-term bringing finance to commercial operators in the UK property market, predominately to lender Tiuta.
Its collapse was triggered after Tuita International entered administration in 2012.
The other two companies under review are Capita and Blue Gate.
Capita Financial Managers was the fund’s authorised corporate director (ACD) until 2009 when it was replaced by Blue Gate.
Impaired consumer protection?
Investigator Raj Parker said he will also assess “the FCA’s involvement in the mediated negotiations before the launch of enforcement investigations in March 2015”.
In 2014, the FCA stated: “At this stage, we believe that a negotiated settlement to address investor losses from the Connaught Series 1 Fund represents the best course of action for all parties.
“Therefore, for a limited period, we will support the parties concerned in an attempt to reach a negotiated resolution with a view to obtaining appropriate redress for investors as soon as possible,” the regulator said.
Parker will also “look at whether the regulator’s jurisdiction at the time impacted its ability to protect consumers and whether its approach to communications with investors in the fund was appropriate, timely and transparent”.
“I am keen to hear from anyone who has been affected and would encourage them to email any relevant information to me,” he added.
Parker is an associate member at Matrix Chambers and a part-time judge and arbitrator.
Background
The Connaught fund was originally launched as a guaranteed low risk income fund in 2008.
The unregulated collective investment scheme was marketed as low risk.
The FCA was strongly criticised for its handling of the case, which resulted in an apology in 2016 for its poor treatment of a whistleblower whose warnings about the fund were not heeded by the FSA.
In November 2017, Capita was publicly censured by the FCA and ordered to pay £66m ($81.5m, €74m) to investors who suffered losses from investing in the Series 1 fund. This was after the regulator had secured an £18.5m redress the year before.
