Advisers ask why FSCS rejects non-Isa claims

25 March 2010 | By Hannah Stodell

Advisers have questioned inconsistencies in the Financial Services Compensation Scheme’s decision not to compensate non-Isa investors in certain Keydata plans after it pledged to pay out on most equivalent Isa investments.

Several investors on the Keydata Victims website have complained that the FSCS rejected compensation claims for their non-Isa investments in secure income bonds 1-3 as it cannot establish that the apparent misappropriation of underlying assets results in a liability on Keydata’s part.

The FSCS says it is dealing with claims on a case-by-case basis but is unable to confirm how many standalone non-Isa claims have been successful. It has paid about 3,000 Keydata claims and has rejected around 130 claims.

It says: “Although we consider it is possible that Keydata breached contractual and other legal obligations owed to non-Isa investors, we cannot be sure on the evidence currently available to us that any such breaches caused a loss giving rise to a valid claim for damages.”

There are 4,103 Isa investments and 1,973 non-Isa investments in SLS Capital totalling £103m. Administrator Price-waterhouseCoopers says there are 5,500 investors with one or more of these investments.

Around 23,000 Keydata clients with £349m invested in Lifemark are waiting to find out if they will recover their money as company directors work on a deal to bridge liquidity problems.

AWD Chase de Vere senior manager Jason Walker says: “The only claims that appear to have been successful are Isa clients or those with both an Isa and direct investment. I struggle to understand how the FSCS rejected claims based on their reasoning. People looked at the product, saw it was Isa-able, did not invest through an Isa but still felt it was regulated, safe and adhered to the rules.”

Baronworth Investment Services director Colin Jackson says: “I cannot work out why they would make one case for Isas and another for non-Isas. We need reasons for their decisions.”

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