Administration for finance firm

Lehman was a high-profile casualty of the global banking crisis

Another financial company which sold investments backed by the collapsed US bank Lehman Brothers has gone into administration.

Arc Capital and Income (ACI), based in London, sold structured financial products, some backed by Lehman, via independent financial advisers.

ACI faced potential mis-selling claims from investors following Lehman's insolvency last year.

ACI's closure means about 250 investors may now claim compensation.

The decision of the company to put itself in administration was prompted by the Financial Services Authority's (FSA) recent investigation of the way the complicated "structured products" had been sold.

"Some of the structured products sold by the firm in 2008 were backed by firms in the Lehman Brothers Group," said the regulator.

"The marketing and distribution of these products, along with the wider structured products market, have been subject to an FSA review," it added.

Earlier in October two other firms - NDF and Defined Returns Ltd (DRL) - which also offered a number of structured financial products backed by Lehman, announced they were going into administration.

Compensation

Money may be offered to investors by the Financial Services Compensation Scheme (FSCS) which compensates people who lose money if their bank, insurance company or other financial firm goes bust.

The firm's administration will affect investors in ACI products in different ways Financial Services Authority

The FSA says the ACI customers who can lodge a claim are those who bought the Lehman-backed policies during the past five years.

Policies backed by other investment institutions may not have suffered any loss so investors in those policies may not be eligible for compensation.

ARC had about 10,000 investors, most of whose policies were backed by other big banks such as RBS, Barclays, Lloyds, Morgan Stanley and JP Morgan.

Getting in touch

The Financial Services Authority (FSA) has been reviewing the UK structured products market in the light of the Lehman collapse in September 2008.

This included an examination of ACI's systems and controls as well as their marketing literature.

The administrators, Robin Davis, Melvyn Carter and John Alexander of Carter Backer Winter (CBW) LLP, will contact all customers who bought products through this firm, setting out what they need to do next.

"They will take over the running of the company with a view to achieving a better result for the company's creditors, including investors, than would be likely if the firm were wound up," said the FSA.

"The firm's administration will affect investors in ACI products in different ways, depending on when they invested in the product and who provided the underlying securities," the regulator added.

CBW said: "[We] are working to offer the business, or part of it, for sale as a going concern in order that investments continue in the way they were originally proposed."

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