Aifa says ruling on Keydata does not set precedent for IFAs

26 August 2010 | By John Kenchington

Aifa says the Financial Ombudsman Service ruling against Norwich & Peterborough Building Society over its advice on Keydata should not alarm IFAs who sold the products.

In a provisional judgment, the FOS ruled that Norwich & Peterborough should pay a couple’s £28,000 investment plus interest relating to a Keydata product invested in Lifemark.

The judgment, which is the subject of an appeal by N&P, found the product “exposed their capital to an inappropriate level of risk”.

N&P branch advisers sold 3,100 Keydata polices and it has applied to the FSA for a waiver that would put all complaints on hold until the regulator has decided how they should be handled.

Aifa director Rob Sinclair says the Keydata debacle involves a number of complex issues and any ruling against the way a building society sold the products should not be seen as necessarily having consequences for IFAs who sold Keydata products.

He says: “It is an individual case. It could be these were very, very cautious people who had never invested before or it could be something else entirely.”

“The ombudsman is not a precedent-setting body. If they believe they are setting a precedent, they have to contact the FSA. This is a complex case where there are a range of issues which need to be taken into account.

“The Keydata issue is so interwoven, with the compensation scheme and ombudsman involved. Until we get to the end of these processes it is very hard to make judgements.”

In an interview last week with BBC Radio Cambridgeshire, N&P chief executive Matthew Bullock defended the advice given by his staff, although he admitted some clients may had been misadvised. He said Keydata was “run into the ground by the management” and N&P has been left to pick up the pieces.

Bullock said he hoped the Financial Services Compensation Scheme will decide next month that Lifemark investors can claim for compensation.

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