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FSCS to start paying structured product claims

Help on the way for some investors

The Financial Services Compensation Scheme (FSCS) has announced it will soon start paying out compensation to some investors who held structured products backed by Lehman Brothers, the failed American investment bank.

The FSCS has identified two broad categories of products sold by three UK firms, NDF Administration Limited (NDF), Defined Returns Limited (DRL) and Arc Capital and Income plc (Arc). They are ‘Capital Secure’ and ‘Capital At Risk’ products.

Investigations indicate that Capital Secure products may have been mis-sold by NDF, DRL and Arc, so the FSCS will be sending around 1,700 investors who held them claims application forms. 

The FSCS says that this will happen before the end of December, and that it will aim to pay out eligible claims to individuals within six months of receiving an application form and supporting information.

Capital Secure structured products

The FSCS has released the following list of Capital Secure investments that may have been purchased from NDF, DRL and Arc:

  • NDF – Capital Secure Fixed Growth Plan March 2008
  • NDF – Capital Secure Fixed Growth Plan April 2008
  • NDF – Capital Secure Fixed Growth Plan June 2008
  • DRL – Enhanced Returns Plan Issue 1
  • DRL – Enhanced Returns Plan Issue 2
  • DRL – Enhanced Returns Plan Issue 3
  • DRL – Enhanced Returns Plan Issue 4
  • DRL – Enhanced Emerging Markets Plan Issue 1
  • DRL – Enhanced Returns Plan Issue 5
  • Arc – Bull & Bear Enhanced Investment Plan 3.

Capital At Risk structured products

The FSCS says that its investigation into Capital at Risk products will continue, as it is not yet in a position to confirm whether these products are likely to give rise to valid compensation claims.

The investments defined as Capital At Risk products include:

  • NDF – Fixed Income or Growth Plan February 2008
  • NDF – Fixed Income Plan June 2008
  • DRL – Kick Out Performance Plan Issue 1
  • Arc – Fixed Income Plan 6
  • Arc – Stepped Kick Out Plan 5.

The FSCS will update investors who held these products with further information as soon as its investigations are complete.

Investing in structured products

Loretta Minghella, FSCS Chief Executive, says: ‘We have been working closely with the Financial Services Authority and the administrators of all three firms to establish where we may be able to help. We are pleased to say that we are now able to send application forms to investors with Capital Secure products and will start making payments to eligible claimants as soon as the
application forms are returned to us.

‘Meanwhile, we are doing everything we can to complete our investigations into the Capital At Risk products as quickly as possible.’

For more information on how structured products work and the risks associated with them, read the Which? guide to structured products.

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