Keydata chief slams the regulator's role
Share
Keydata founder Stewart Ford hit back last week at the FSA over its statements on the Keydata/ Lifemark saga.
After making scant public comment since Keydata went into administration in June 2009, a statement from Ford’s PR representative Media House International attacked the regulator for putting “highly prejudicial and unproven statements” into the public domain.
Ford has issued a formal complaint to the FSA Complaints Commission after the regulator released an FSA enforcement investigation witness statement to the media last July detailing the regulator’s confidential probe into collapsed structured product provider Keydata and its associated Luxemburg special purpose vehicle Lifemark, including concerns about a liquidity gap with Lifemark’s underlying funds.
He has hired Media House International executive chairman Jack Irvine, a crisis management and political affairs specialist, along with tax firm Aegis Tax to investigate the circumstances surrounding the demise of Keydata and Lifemark.
Irvine says the views expressed in the FSA’s witness statement are “nothing more than unsupported and unsubstantiated opinions” yet are being treated as the regulator’s official and final position on the investigation.
He says: “This is yet to happen. Indeed, the FSA enforcement investigation team has yet to present Mr Ford with its final preliminary investigation report for his initial comments.”
Last week, Ford confirmed that British Virgin Islands firm LAS Global, which received £38m in fees from Lifemark, was set up by one of his family trusts as “a mechanism to collect fees”.
A draft document recently published by Lifemark revealed it paid over £80m in fees and commission to LASG and Keydata.
LASG received the funds as part of an agreement giving it 10 per cent of all client funds invested in the vehicle’s life settlement bonds. This payment was for “negotiating contracts for administrative parties, introducing and advising on distribution opportunities and providing support on operational matters related to the bonds”.
Keydata was paid £20m in total up-front fees and £21.5m of trail commission between 2006 and 2009 with a further £29m due to be paid between 2010 and 2019. It received up-front 2.5 per cent commission for funds invested in the bonds and 2 per cent per annum for interest on income payable for each bond and paid IFAs 3 per cent initial commission and 0.5 per cent trail.
Keydata International, the offshore sales arm of Keydata, was also paid a 5 per cent fee of all funds invested through initial commission charges and trail.
Around 23,000 Keydata clients invested £349m in Lifemark through plans including the secure income bond 4, secure income plan and the defined income plan. Lifemark has halted income payments to investors in a bid to preserve liquidity and maintain the value of the policies.
It is understood that US hedge fund CarVal has advanced £3.5m to Lifemark as part of a proposed scheme of arrangement to be presented to bondholder trustee SMP Trustees in the coming weeks. This was amid growing concern among advisers that Lifemark’s underlying life settlement policies could become worthless if policies were allowed to lapse due to its inability to meet premium payments.
Ford’s spokesman rejects this suggestion, claiming that Lifemark was due to receive £6.8m of insurance proceeds which have recently matured and the cash injection was “not necessary, at least in the short term”.
He says: “In these circumstances, there was simply no need for this short-term injection of liquidity on such onerous terms. It is not known why KPMG partner and Lifemark provisional liquidator Mr Collard considered it necessary and appropriate for Lifemark to agree to pay CarVal a penal rate of interest and to grant CarVal a six-week period of exclusivity to negotiate a full refinancing.”
Ford’s spokesman claims Lifemark’s liquidity problems are due to the interventions of the regulators and their agents since summer 2009 which have overturned the vehicle’s business plan and financial projections.
He claims that the CarVal deal would be “disastrous” for Lifemark bondholders and should not be allowed to proceed, claiming several othercommercial suitors in the market would agree more reasonable terms but regulators and their agents do not appear to want to negotiate the best possible deal for bondholders.
Keydata administrator PricewaterhouseCoopers partner Dan Schwarmann refused to be drawn on Irvine’s comments and would not confirm details of a possible deal with CarVal but emphasised that an effective restructuring of Lifemark would help fund possible legal action for creditors against implicated parties.
He says: “Our plan is to help in any way with the restructuring of Lifemark which will allow money to flow to investors and Keydata so that we can look at the main focus of seeking recoveries from parties where appropriate, whether or not through litigation.”
If you enjoyed this article, sign up here to receive daily email updates from Money Marketing and Follow @_moneymarketing
