FCA has issued a final notice against Capita Financial Managers Limited (CFM), publicly censuring the firm and ordering it to pay up to £66m in compensation to investors that suffered as a result of CFM’s investment in the Guaranteed Low Risk Income Fund, Series 1 (the Fund), an unregulated CIS of which CFM was the operator, that is now in liquidation.
FCA said CFM had “failed badly” in relation to responsibilities under the Principles for Business, and that the payment was calculated with a view to returning investors as far as possible to the position they would have been in had they not invested in the Fund. CFM had operated the Fund between March 2008 and September 2009, and FCA found it:
- failed to conduct adequate due diligence on the Fund before taking it on, rectify its errors when it realised its processes were inadequate, and adequately monitor the Fund ( in breach of Principle 2). It also failed to inform the replacement operator which took over after its resignation of the issues it had found; and
- failed to communicate with CFM investors in a way that was clear, fair and not misleading (in breach of Principle 7).
Public censure was considered more appropriate than a financial penalty because CFN would not have been able to make the required redress to the investors if it had also had to bear a fine. Even so, Capita plc will support the payment. In other circumstances, FCA would have imposed a £15m fine.