Capita has been ordered to pay £66m of compensation to customers (but it has swerved a huge fine)

Oliver Gill
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Capita resigned as the fund manager in 2009 with the vehicle's assets being wound up in 2012 (Source: FCA)

Capita has swerved an enormous fine from the Financial Conduct Authority (FCA) despite leaving investors with big losses from the collapse of one its funds.

The City watchdog concluded that if it fined the FTSE 100 giant, there would be no money left to compensate those left out of pocket by the failure of Guaranteed Low Risk Income Fund.

Instead, Capita has agreed to pay £66m of compensation back to customers affected.

Capita was expecting to pay a fine on top of the compensation and had made a £37m provision for penalties and associated legal costs.

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Bridging finance

The fund, later known as the Connaught Income Fund, was launched in 2008 to provide short-term bridging finance to property development firms. Capita resigned as the fund's manager in 2009, with the vehicle being wound up in 2012.

The FCA said Capita had failed to conduct adequate due diligence on what the fund was doing, failed to rectify this failure when it realised and "failed to adequately monitor the Fund throughout most of its tenure as operator".

The FCA also found Capita failed to communicate with the fund’s investors in a way that was "clear, fair and not mis-leading".

In a statement the FCA said:

These failings would ordinarily have resulted in the imposition of a penalty. However, the FCA has taken account of the fact that CFM [Capita Fund Managers] itself would not have been able to make a payment of up to £66m for the benefit of the fund’s investors if a financial penalty were also imposed.

"For this reason, the FCA does not consider that it would be appropriate to require CFM to pay a financial penalty, and has instead issued a public censure in relation to CFM," it added.

Mark Steward, the FCA's executive director of enforcement and market oversight, said: “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."

Capita added: "To ensure that investors receive appropriate redress and to bring this matter to a close enabling the smooth disposal of CFM, CFM and Capita have agreed a full and final settlement with the FCA. In reaching this settlement, the full cooperation which CFM has given to the FCA during the course of its investigation has been acknowledged."

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