Doubts remain as Keydata is put in default
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Advisers have welcomed confirmation from the Financial Services Compensation Scheme that it has declared investment firm Keydata in default but warn that uncertainty remains for some categories of investors.
Last Friday, the FSCS said it will start sending application forms to Keydata investors and consider claims for compensation.
The FSCS identified two potential claim categories and anticipates that the vast majority of customers who invested in the secure income bond issues 1, 2, 3 (category one) will be eligible for compensation. In June, administrator PricewaterhouseCoopers revealed over £100m of assets had gone missing from these plans which were invested with Luxemburg investment vehicle SLS Capital. It said evidence suggested the underlying assets have been liquidated and may have been misappropriated. A number of these investments were sold as Isas but HM Revenue & Customs confirmed they were non-compliant.
Clients who did not invest in Isas may also be able to bring a claim for compensation if it can be established Keydata caused them to suffer a financial loss.
Category two relates to non-Isa eligible Lifemark products which affect around 16,000 clients in the secure income bond issue 4, the secure income plan issues 1 to 12 and 14, the defined income plan issues 1 to 8 and the income plan issues 1 to 12 and 14.
Products with a term of five years or less did not qualify for inclusion in an Isa.
HMRC says no client will lose their Isa wrapper as a result of Keydata’s administration. Those with non-qualifying products can regain Isa exemptions once their investment matures or is redeemed.
AWD Chase de Vere senior manager Jason Walker says: “It is good news but we have not had any clarification for investors with plans within a trustee-based investment, a Sipp or offshore - how will they be treated?”
An FSCS spokeswoman says: “Investors in trustee based investments may be eligible for compensation but will be considered on a case-by-case basis. Non-Isa (direct) investment claims will also be considered on a case-by-case basis. For category 1 Isa claimants, the FSCS will deduct any income received when calculating the compensation. For category 2 Isa claimants where the capital is intact, compensation is likely to be limited to the tax liabilities only.”
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