Board battered by onslaught at N&P's AGM

6 May 2011 8:00 am | By Natalie Holt

Angry Keydata investors voiced their fury at the Norwich & Peterborough Building Society’s annual general meeting last week over the board’s handling of the crisis.

Last month, the FSA fined N&P £1.4m for misselling Keydata products and the building society agreed to pay £51m in compensation to investors.

Around 100 society members, many of them elderly, gathered in Peterborough for the AGM last Wednesday, which was attended by 240 people in total.

N&P victims group member Michael Peters kicked off the meeting by asking the board what had happened to the income originally promised to Keydata investors.

Keydata products offered investors an income or growth investment, either through an Isa, a Pep or a direct investment. The income option paid a percentage income monthly, quarterly or annually, while the growth option rolled up and reinvested the income payments to provide compound growth.

Investors were commonly offered income at a rate of 7.5 per cent. Both options aimed to return capital in full at the end of term.

N&P is in the process of writing to all Keydata investors with an offer of compensation based on the size of their initial investment and when the investment was made, taking into account any redress already paid by the Financial Services Compensation Scheme.

N&P risk and finance director Jeff Pritchard replied: “The offer put to each investor will be consistent. It will be paid based on a variable interest rate that follows the Bank of England base rate over time. To answer your point about guarantees, we will not be making an offer of 7.5 per cent.”

Pritchard said customer letters detailing compensation payouts have taken a long time to send out as they were dependent on information from the FSCS and FSA approval. He said all investors should receive their letter by May 6.

One attendee asked the board why no action was taken on a report produced by N&P’s compliance team in 2007, highlighting concerns about Keydata sales.

N&P chairman Gordon Horsfield said: “There was a report which had limited circulation. If there had been wider circulation, it perhaps would have had an impact on the distribution of Keydata products.”

Horsfield said he could not disclose the report’s contents.

N&P member David Pearson called for the board to resign, including Pritchard.

Horsfield replied: “The points that have been made are interesting and relevant. I should start by pointing out that Jeff Pritchard has been a primary mover and shaker in trying to resolve Keydata. He was not the risk director at the time. For you to spit in his face when I know how hard he has worked is not very fair.”

An elderly woman called out: “Well we have not been treated very fairly.”

Investors continued to level criticism at the board. One woman said: “You have been fined for misselling. We here are the victims of that, we here who are not getting our full money back. Had we put our money under the mattress we would be better off today than we are by investing in your society.” This was met with cries of “hear hear” and a round of applause. The meeting continued in the same vein. One member said he had run up a legal bill of £11,000 trying to get his money back.

Another member, Tony Hunt, said: “Driven by commission, you advised people to withdraw from safe accounts into what became known as death bonds. It was totally immoral. If I had known that these products were based on the deaths of Americans, I would never have invested.”

When Hunt asked the board members if any of them had regrets over Keydata, every member raised their hand.

The board agreed to hold further meetings to discuss the compensation payouts once all investors had received their letters.

Pritchard told attendees: “I would like to offer an apology to all of the members of the society and those who invested in Keydata. It is a genuine apology not just from me but from the board and everyone who works for the society.”

He said N&P no longer offers advice, having transferred its 21 branch-based advisers to Aviva in March.

He confirmed that an independent review is also being carried out to investigate other products sold by N&P’s advisers.

He reminded attendees about interest-free loans offered to investors last year to replace the suspended income from Lifemark bonds.

The meeting lasted two and a half hours, eventually discussing the society’s annual results and the proposed merger with the Yorkshire Building Society.

N&P looks to be forced into the arms of the bigger society to repair both its battered balance sheet and its damaged reputation.

Members will vote on the merger in August.

 

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