Having your cake – and eating it

Posted on January 19, 2013


We Americans love those strange expressions you Brits come up with. Like having your cake and eating it. I mean, c’mon, why would you bother having a cake if you couldn’t eat it? And it’s not as if you Britishers are starving these days. Ever since we helped you out of a hole money-wise after WWII, you’ve been doing just fine. And today you’re second only to us Yanks in the global obesity table. So you’re eating plenty of cake!

We guess you mean that bad news often follows good. If that’s the case, we agree. And so it seems to be with this Connaught affair. The other day we heard those guys at the SFO found their balls and prosecuted a couple of brothers who ran a bridging loan company, raised a funding line and siphoned off much of the money via dodgy loans to family and associates. We wish we could have seen the faces of our friends at Connaught and Tiuta when that story hit the front pages!

Less good however is the news that the Financial Services Compensation Scheme (FSCS), set up alongside the FSA by the Financial Services and Markets Act (2000) to compensate investors who lose money when certain financial services firms fail, appears to be run by people as clueless as their counterparts at the FSA who let the fraud and theft at Tiuta continue after the whistle was blown in early 2011.

It looks like the FSCS will have to make up around £37m of investors losses after a fund called Arch Cru went under. Its Operator, Capita Financial Managers (sounds familiar?) had failed to spot the ample early warning signs, and was censured by the FSA late last year. However, the hapless regulator lacked the spine to make it, and other regulated firms involved in the affair, compensate investors in full; hence, the FSCS and investors themselves both took sizeable hits.

We’ve just heard that the FSCS has decided to outsource some of its work, which involves evaluating claims from people who believe they’ve lost money because of misconduct or negligence by financial institutions. Who has it entrusted with that responsibility? You guessed it – our friends at Crapita!

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