Capita forced to pay out £66m to investors over Connaught fund farce
Watchdog finds outsourcer's oversight severely lacking
Capita's investment business has been forced to pay up to £66m to investors by the Financial Conduct Authority (FCA) over its handling of the collapsed Connaught Income Fund.
The Connaught Income Series 1 Fund opened in March 2008 and provided short-term bridging finance to commercial operators in the UK property market, and was managed by Capita Financial Managers (CFM) until it pulled out in 2009.
The fund went into liquidation in September 2012, with investors reportedly losing £110m.
The FCA found that CFM failed to conduct adequate due diligence on the fund prior to taking it on and did not adequately monitor the fund throughout most of its tenure as operator.
"Serious issues" arose and CFM failed to ensure the replacement operator was fully aware of the problems. The FCA also found that CFM did not communicate with the fund's investors in a way that was clear, fair and not mis-leading.
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."
He added that the resolution would not have been possible without the co-operation of Capita and CFM. "This agreement will provide substantial benefit to all outstanding investors, including those who invested in the Fund after CFM resigned as Operator."
We have asked Capita for a comment. ®