The Financial Conduct Authority (FCA) has told Capita Financial Managers (CFM) it must pay up to £66m to investors who suffered loss as a result of investing in the Guaranteed Low Risk Income Fund, Series 1 (or as it became later known, the Connaught Income Fund), which is now in liquidation.
Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA said:
“Consumers are entitled to expect that authorised firms will carry out their responsibilities under our Principles for Businesses with care and diligence. These responsibilities are paramount and in this instance CFM failed badly.
“The aim of the payment announced today is to return the amount originally invested, placing investors as closely as possible back into the position they would have been in if they had never invested in the fund.
The fund was an unregulated collective investment scheme (UCIS) which began operation in March 2008 providing short term bridging finance to commercial operators in the UK property market.
CFM was the operator of the fund until it resigned on 25 September 2009. The fund ultimately went into liquidation on 3 December 2012.
Due diligence failure
The FCA found that CFM breached Principle 2 of the FCA’s Principles for Businesses because it failed to conduct adequate due diligence on the fund prior to taking it on and failed fully to rectify this failure when it became aware that its processes had been inadequate. It also failed to adequately monitor the fund throughout most of its tenure as Operator.
The amount to be returned to investors will take into account that investors have already received a distribution of £22mn made in the liquidation, as well as interest and other payments. This also includes any awards made under the Financial Ombudsman Scheme they may have received since they invested.
The FCA has appointed Duff & Phelps as agents for the FCA to carry out the calculation and distribution of monies to investors.