The Financial Services Authority, the UK financial regulator, has issued "decision notices" setting out that the watchdog wants to ban two key executives at Arch Financial Products from having any role in regulated financial services and to fine them heavily for misconduct.

The FSA published the Decision Notices for Arch Financial Products, its chief executive Robin Farrell and Robert Addison, senior partner and former compliance officer. All three have referred the matters to the Upper Tribunal, which will determine the appropriate action for the FSA to take, upholding, varying or cancelling the FSA’s decisions.

The Decision Notices set out that the FSA wants to prohibit Farrell and Addison from performing any role in regulated financial services, to fine them £650,000 (over $1,055,000) and £200,000 respectively and that the FSA would have fined AFP, the investment manager of the CF Arch cru funds, £9 million for its misconduct, were it not for the firm’s financial position.

Instead, the FSA wants to issue a public censure in respect of AFP’s conduct, which it has already done against Capita Financial Managers, the authorised corporate director of the CF Arch cru funds, as reported in WealthBriefing.

The FSA has also told firms which advised on investments in the CF Arch cru Investment and Diversified Funds to contact all their clients asking if they want their case reviewed to determine whether they were mis-sold the funds and may be eligible for redress, again reported here.

AFP predominantly invested the funds in Guernsey cell companies listed on the Channel Islands Stock Exchange, which it set up and for which AFP was also the investment manager. The Guernsey cells then invested in private market assets, such as private equity, private finance, hedge funds and other alternative asset classes.

In respect of certain transactions where there was a risk of AFP (or its associates) making a gain at the expense of the Guernsey cells, the FSA’s view is that AFP was reckless as to the risk that the conflicts of interest would not be managed fairly. For example, in one transaction, the FSA understands that AFP received a fee of £3 million from the Guernsey cells, which AFP did not disclose to the independent directors of the Guernsey cells or record in any contemporaneous transaction documentation.