As part of the “negotiated settlement”, the FCA has said it will, for a limited period, support the parties concerned in an attempt to reach a resolution leading to “appropriate” redress for investors as soon as possible.
Connaught entered administration in September 2012 after the collapse of its Income Series 1,2 and 3 unregulated collective investment schemes (UCIS). The schemes provided credit lines to stricken bridging lender Tuita, a firm that also went into administration in September 2012. About £118m was invested in the scheme.
The parties the FCA will try to broker a deal with are likely to be the administrators of Connaught Asset Management and Tuita, the fund’s operator Blue Gate Capital, investors represented by the Connaught Action Group and major creditor HMRC.
In a statement the FCA said: “We encourage the parties concerned to engage constructively with us and each other for this limited period to avoid potentially lengthy and costly alternatives to a negotiated settlement.
“This is a voluntary and confidential process, and so we will be unable to comment further on its progress until an agreement is reached or negotiations break down.
“The FCA is focused on securing fair redress for those who invested in Connaught Income Funds.”
Connaught was the subject of an FSA warning shortly before the suspension of the Series 1 fund in March 2012, which said Connaught had misled investors over the risk levels in investing in bridging loans.
“In the literature we have seen, the Connaught funds are described as ‘very low risk’ and ‘low risk’,” the FSA notice read. “It makes comparisons between investing in them and putting your money in high street bank and building society accounts. We believe this is misleading.”