FSCS Admits Mishandling Thousands Of Arch Cru Claims

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The Financial Services Compensation Scheme (FSCS) has admitted making errors when handling around 2,000 claims regarding failed fund Arch Cru.

By June 2016, the FSCS had paid a total of £58m to investors affected by Arch Cru’s failures.

However, in its latest report, the compensation scheme said it had made under-payments of £814,000 to 1,075 customers and over-payments of £702,000 to 992 Arch Cru claimants since 2012.

It was only when a customer complained last year that the scheme reviewed its records and began to rectify the issue.

An FSCS spokesperson says that under-payment cases have been settled and customers have received the money they were due. However, it’s unclear whether the FSCS will be able to recover the money lost through over-payments.

Chief Executive Mark Neale said: “I should acknowledge errors made by FSCS in handling Arch Cru claims.

“Over five years from 2012, we made under-payments of just over £814,000 and over-payments of just over £700,000.

“Once these mistakes came to light earlier this year as a result of a customer’s complaint, we urgently established the cause of the error and reviewed our controls to reduce the risk of a recurrence.

“Inevitably, because of the time since settlement, some over-payments will be irrecoverable.”

The Arch Cru funds represented two open-ended investment companies, both of which were umbrella companies for six sub-funds. The sub-funds were invested in a combination of 21 cell companies.

In March 2009 the Financial Services Authority suspended the funds on the basis that there was insufficient liquidity to meet redemptions.

At the time, the funds had a net value of approximately £363m but following the suspension, the value fell even further.

With many investors losing their entire capital, the FSCS began paying compensation to Arch Cru claimants under a consumer redress scheme in 2011.

And last year, the FSCS invited investors to have their claims examined before reaching a final settlement.

When a customer enquired about a discrepancy in regards to his compensation money, the scheme realised that a number of claims had not been accurately calculated.

Although news that the FSCS may struggle to recoup over-payments may not sound too worrying, concerns have been raised as the money was funded by the financial services industry and every firm is required to pay an annual levy.

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