Farrell, who was chief executive of Arch Financial Products (AFP), and Addison, who was a senior partner and compliance officer at the firm, have now taken the case to the Upper Tribunal which could uphold, vary or cancel the FSA’s decisions.
Both the FSA and the individuals concerned will present their cases to the Tribunal, which will make its decisions public on its website in due course.
The notices follow an announcement by the FSA yesterday regarding a redress scheme for investors in Arch cru funds who may have fallen foul of adviser mis-selling.
For more details of the redress scheme and what advisers have been ordered to do, click here.
Failures and lack of integrity
In the decision notices the regulator said it would have fined AFP £9m were it not for the firm’s financial position.
AFP was the investment manager of the CF Arch cru Funds and the FSA said it failed to demonstrate fair management of conflicts of interest.
Managing conflicts was a key responsibility of both Farrell and Addison and in the FSA’s opinion their failings in this regard were reckless and therefore demonstrated a lack of integrity.
On top of this the City watchdog said it felt AFP had pursued an investment strategy which resulted in significant liquidity risks for the funds.
Tracey McDermott, director of enforcement and financial crime, said: "When making investment decisions, a fund manager should ensure that it puts investors’ interests ahead of its own and be able to demonstrate that it has managed conflicts of interest.
"Those with responsibility for managing authorised firms must ensure not only that the firm complies with regulatory requirements but also that they personally act with the highest standards of integrity."
Farrell and Addison applied to the Tribunal for an order preventing the FSA from publishing the decision notices but their application was not successful.
