Let’s start with Arch Cru. I went to one of their launch seminars. The promise (3% above base rate return after charges guaranteed on a monthly basis) was so fanciful, I spoke to their chief economist about the underlying investments. He confirmed the return would come from loans to private equity companies, which he called low risk.
What could possibly go wrong?! As a firm we didn’t recommend Arch Cru. But many did, and there were even some firms, no doubt attracted by the idea of 3% up front and 1% pa for doing nothing, who moved all of their client money across.
When the inevitable happened and Arch Cru went bust taking many firms down with them, I (and many of you) had to pay for it, via the FSCS.
Now, this is so clearly wrong, so obviously completely crackers, that I struggle to finds words to express the sheer injustice of the situation.
Once, when I was about 9, me and some mates had been playing cricket all afternoon. We only had one bat and ball. They belonged to Andy, two years older than me, and he’d batted most of the afternoon before we finally got him out. When it was my turn, and I borrowed his bat. The ball was bowled to me (by Andy), I hit it, and the bat broke. Andy demanded that because I was holding the bat when I broke, it was my fault, and therefore I should pay for it. He was bigger than me.
I felt then like I feel now as I read that the FSCS are going to demand many more thousands of pounds from me to pay for the failure of Catalyst (amongst others). Indignant, but utterly powerless. There is something very Big Brother like about a Government quango that can simply demand money as it sees fit. That’s Big Brother as in the Orwell vision of a dystopian future, not the reality TV show featuring people being paid to undertake ridiculous tasks while we all watch amazed at their brazenness. Although…
Meanwhile, the FSA employees who failed to see in Arch Cru what was so obvious to me and many others do not have to pay a penny. Neither do the IFAs whose businesses went bust. Many of them suffered financially from their misjudgement, but maybe there are also some who extracted cash from their business before it went bust handing the liability to the FSCS and therefore to me?
Because this is what I don’t get in all of this. Where did this money actually go? If the FSCS need to pay £150m, it means that those people lost £150m. Which means Catalyst and others took £150m from them, and lost it. Where?! Can’t the FCA find that out, and go and get some of it back? Surely there is someone else more liable for this money than firms who refused to have anything to do with it?
Can someone please come up with an idea as to what we can actually do about this crazy situation where the good firms subsidise the bad? Last year’s interim levy all but wiped out our staff bonus pool. How can that possibly be right?
Back in my childhood, Andy’s mum was consulted, and she decreed that it clearly wasn’t my fault that the bat broke, and that Andy was being a bit of a bully. She even told him off. Where is Andy’s mum now, when we need her so badly to sort out this injustice.
Chris has a novel out called A Bridge Of Straw – more info here