Originally known as the Guaranteed Low Rick Income Fund, Series 1, it was an unregulated collective investment scheme (Ucis) that was launched in March 2008. The fund provided short-term bridging finance to commercial operators in the UK property market.
CFM was the fund’s authorised corporate director until 2009 when it resigned and was replaced by Blue Gate.
Following the collapse of bridging lender Tuita in April 2012, the fund went into administration in December that year, with investors losing up to £100m.
The FCA launched a review into the activities of Capita and Blue Gate in 2015, and secured a payment of £18.5m in July 2016.
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.”
The FCA found that CFM failed to conduct adequate due diligence on the fund prior to taking it on and failed to rectify this failure when it became aware that the processes had been inadequate.
It also failed to monitor the fund throughout most of its tenure as operator.
Ordinarily, these failings would have resulted in a penalty. However, the FCA advised that CFM would not have been able to make a payment of up to £66m for the benefit of the investors if a financial penalty was also imposed.
The UK regulator said it “does not consider that it would be appropriate to require CRM to pay a financial penalty, and has issued instead a public censure”.
“The aim of the payment announced [Friday] 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,” Steward added.
“The amount to be returned to investors to achieve this takes into account the fact that investors have already received a distribution of £22m made in the liquidation, as well as interest and other payments. This also includes any awards made under the Financial Ombudsman Scheme they may have received since they invested.”