The Financial Services Authority and Arch cru investors are caught in a 'Catch 22' deadlock over the release of information about Capita's role in the run up to the funds' suspension.
Arch cru investors face a looming end of November deadline to decide whether to accept a share of the £54m payment deal announced in June by Capita, HSBC and BNY Mellon, or seek a judicial review into the scheme.
But investors have said they are being left unable to judge the fairness of the deal because the FSA has yet to publish details of its investigation into Capita.
IFAonline understands the regulator is keen to issue final decisions for Capita and other firms connected to Arch cru to help investors decide their best course of action.
However, the FSA is banned from revealing findings which could incriminate Capita in potential upcoming judicial review challenges without the firm's consent, under the Financial Services and Markets Act (FSMA).
This week the FSA cleared Capita of any legal responsibility for Arch cru investor losses.
The case has echoes of the nature of FSA's inquiry into the collapse and taxpayer bailout of RBS.
Following a lengthy inquiry, the regulator ruled out action against RBS bosses and provoked an outcry when it said it could not publish its findings unless RBS consented.
The regulator was forced to backtrack and instead promised a partial report in March this year. However, it is not now expected until late in Q4 as the FSA continues to gather evidence.
The FSA, which brokered the Capita deal, is encouraging investors to take the "good outcome", which it said will return about 70% of what they each invested.
However, about 2,700 investors who argue the figure is closer to 50% or less and not guaranteed, have said they are willing to take the matter to the High Court.
A judicial review must be lodged within three months from 31 August, the date the scheme was announced, which gives the group until the end of November to choose to issue proceedings.
Gareth Fatchett, partner at law firm Regulatory Legal, which acts on behalf of the 2,700 investors, said: "Our feeling, having spoken to the FSA, is that the Final Notices may not be ready for release until after the end of November 2011."
Capita has said the payment scheme is "only open for acceptance for a limited period". It will send all investors a personalised offer under the scheme by 31 October.
A separate IFA-led judicial review run by Joe Egerton of lobby group Justice in Financial Services is also under way into the FSA's handling of the Arch cru debacle.
However Fatchett, who has been embroiled in a public spat with Egerton, said investors should not rely on its success to further their own cases.
"Counsel recommends that we do not rely on the IFA judicial review. The review is brought by an IFA with no direct interest in the payment scheme.
"Investors have a direct interest in the payment scheme. It is this link which counsel considers to be crucial to pressure the FSA into disclosing the actual basis for the scheme," he said.
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