The Financial Services Authority (FSA) has been accused of a 'stitch up' over its decision not to fine Capita Financial Managers (CFM) £4m over the Arch Cru scandal.
The Times reports the firm's parent company, outsourcing giant Capita runs several high profile government contracts including the Criminal Records Bureau and BBC television licensing.
The paper said Alun Cairns, the backbench Tory MP who set up an All-Party Parliamentary Group to support investors who lost money, believes the situation was smoothed over to save the government relationship.
He added: "The FSA are not prepared to fine CFM for the failures but at the same time they are pursuing independent financial advisers."
Foot Anstey partner Alan Hughes, who represents about 400 investors, told The Times the settlement was a "stitch-up" between the FSA and CFM.
"The FSA should have the courage of its convictions," he added.
The FSA said it decided not to fine CFM as it would have been unable to pay without help from its parent Capita. Capita made underlying profits before tax of £191m in the six months to June 30 and has a market capitalisation of £4.8bn.
The paper said about 20,000 investors lost some £140m when £360m was paid into two FSA-authorised funds between 2006 and 2009.
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