CAPITA Financial Managers, which provides administration services to asset managers, yesterday escaped a £4m fine but was publicly censured by the UK’s financial watchdog for failing to monitor client cash under its wing.
The company, which is a subsidiary of Capita, escaped the financial penalty from the Financial Services Authority after the watchdog said the company would be unable to pay it. CFM has already contributed £32m to a compensation scheme.
Investors were hit by losses when funds CFM was supposed to be monitoring were suspended in March 2009. CFM was “Authorised Corporate Director” to the two funds, run by investment manager Arch Financial Products, and had a duty to protect investors by monitoring the fund prices but failed to do so until late in 2008. It was discovered the funds were invested in highly illiquid private equity assets, which meant investors struggled to get their cash out.
FSA director Tracey McDermott said: “Capita Financial Managers has major responsibilities in relation to funds holding a very significant amount of investors’ monies. However, its performance in relation to the CF Arch Cru funds fell well short of the FSA’s requirements.”
A £54m payment scheme was set up last June to compensate investors who lost out.
The FSA said CFM would be unable to make its £32m contribution to the scheme as well as a fine. The firm had to rely on its parent firm Capita to help it pay the fee.