Investors suing Capita for compensation over the failed Arch Cru fund range are writing to up to 40 wraps and platforms asking them to pass on details of their action to clients who were also invested in the collapsed funds.
Any investor who has not accepted a compensation offer made by Arch Cru authorised corporate director Capita Financial Managers - which investors claim is a derisory 14p in the pound - can join the case launched by solicitors Harcus Sinclair on behalf of 900 claimants.
Investors are arguing that Capita owed them a common law duty of care to safeguard their money and that it failed in this regard.
The Arch Cru fund range was suspended in March 2009 by the then regulator the Financial Services Authority (FSA) following a warning that it could no longer trade due to pricing and liquidity issues.
At that time it was worth a total of £363.6m. Since then some assets have been sold off - at a heavy discount - and the remainder of the fund range has been valued at around just £66m.
Capita has been censured by regulator for its role in the downfall of the fund - but was neither fined nor made to compensate investors, due to its claim that it had no responsibility for the funds' underlying investments.
The Arch Cru Litigation Committee estimates there are as many as another 2,000 investors with £30m in Arch Cru between them who have not yet signed up to the legal action.
The Capita offer of partial compensation closed on 31 December last year and investors who have not accepted it have until the end of March to join the litigation against the firm.
Reaching out to investors
Harcus Sinclair obtained an order from the court compelling Capita to provide the register of investors in Arch Cru and permitting them to write to investors listed on the register.
However, it does not include the names and contact details of individuals who invested through a wrap or platform.
"There are many investors in Arch cru out there who have no idea that this litigation is an option for them. There may even be investors who do not know that they are actually invested in these funds,' said Arch Cru Litigation Committee chairman John Hawkes.
"Others investors may have been contacted but not fully understood the choices on offer at the time. But now only one choice remains if they want to get back more than whatever small value remains in the funds: Sue Capita."
Hawkes believes wraps and platforms have a moral obligation to contact their clients. "If I were a client who only found out about our legal action when it was too late to join I know whom I would blame for not telling me. It is in their best interests to tell clients about the action for the sake of their own credibility," he said.
The litigation has no participation cost and legal expenses will be deducted from any award only in the event of success. If the case fails, litigants are insured against costs.
Financial advisers are expected to fork out £31.5m in compensation to clients who invested in the Arch Cru funds and were found to have received unsuitable advice.
Partner Insight Video: Advisers have had to adapt to the changing investment landscape.
Investment trust savings scheme