Lawyers urge advisers to unite to fight Keydata claims
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Law firm DAC Beachcroft is calling on advisers who are being pursued by the Financial Services Compensation Scheme for Keydata recoveries to consider launching a group action to challenge the FSCS.
Law firm Herbert Smith wrote to advisers on behalf of the FSCS in October and again last week to start the legal process of recovering compensation paid to Keydata investors. The FSCS has so far accepted 5,200 claims from Keydata secure income bond investors and paid out £67m relating to those claims.
The particulars of the claim sent by Herbert Smith last week, seen by Money Marketing, says the Keydata product literature was misleading and the risks were unclear. The FSCS argues this should have been apparent to IFAs.
DAC Beachcroft partner Daniel Preddy says: “In reaching its decision to pay compensation to Keydata investors, the FSCS made determinations and concessions which are fundamentally inconsistent with the recovery claim it is now bringing against IFAs.”
He says by acting collectively to challenge the claims, IFAs can pool costs and act from a stronger negotiating position.
Preddy says that under a group action, advisers could develop “crucial generic defences against claims in relation to causation and foreseeability”, as well as the suitability of the Keydata products.
An FSCS spokesman says: “The FSCS pursues recoveries whenever practical and cost-effective to do so. We believe claims may exist against IFAs for compensation costs relating to certain Keydata products. We cannot comment further at this stage.”
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Readers' comments (7)
Neil F Liversidge | 30 Nov 2011 3:04 pm
I have had quite a few calls and emails in the last few days all on the theme that "AIFA should do something about this", by which the caller usually means that AIFA should dig into (what the callers must presume to be) its bottomless pockets, in order to fund a legal challenge. In every case the firms that have called me have not been AIFA members. here is the reality: If all who blogged and complained about Keydata and similar were AIFA members to start with we would have a trade association strong enough to contemplate mounting such a challenge. As it is they haven't so we don't. Most of you are not prepared to pay for it. It reminds me of an accountant client of mine who I saw a few years ago. He came wanting CIC on himself and his wife but changed his mind when he found out the cost, small though it was as a proportion of his £90k income. Shortly after the case had died he got in touch to say his wife had contracted cancer and was there any way the proposal on her could be re-started? The attitude of those who called me this week was no more reasonable or logical than my erstwhile client. If you are not prepared to pay for protection - which is what trade body representation amounts to - you don't get it, and then when you need it, like my client, you learn the hard way. Blunt I know, but quite true.
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Incompetent Regulators Award Team | 30 Nov 2011 3:04 pm
Lawyers would say that. They win in all cases whether they win or lose!!!!
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Anonymous | 30 Nov 2011 4:36 pm
@ Neil - Will AIFA be looking at the issue in view of the fact there ARE AIFA members on the 500 list?
Not me by the way.
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Anonymous | 30 Nov 2011 5:31 pm
Neil, where were AIFA when it came to protecting those who would have benefitted from grandfathering?
Anyone on the list would have to be pretty naieve to believe aifa even gives a toss.
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Julian Stevens | 30 Nov 2011 6:13 pm
Let us not forget that the FSCS was quite happy to throw £280,000 at its team of lawyers defending itself against the Judicial Review brought against it last year by Regulatory Legal. And, if it takes twice that to defend itself against another legal action, then doubtless the FSCS will have no hesitation in spending £560,000, if that's what it takes to flatten the opposition.
And why not? It's all OPM and can be easily recouped simply by lumping it onto next year's levy bill.
Trying to fight through the legal system an opponent with limitless resources is futile. The only strategy is regulatory reform and that means the creation of an Independent Regulatory Oversight Committee with the (enforceable) power to say to the likes of the FSCS and the FSA: This is wrong and you aren't going to do it.
Write to your MP and, whilst you're at it, point out the fact that the FSA, in the wake of its 2007 arrow visit to KeyData, did nothing with the information it discovered. To most right thinking people, this constitutes reckless negligence, on which the FSA is doing everything it can to deflect attention from itself.
Don't waste your money on lawyers, though. The FSCS will outgun you at every turn.
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Exasperated Me | 1 Dec 2011 10:33 pm
Neil, if AIFA had the vast warchest of the FSCS would it throw money at this cause?
I don't think so.
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Darren | 2 Dec 2011 11:06 pm
Pointless - all poiuntless.
If every IFA, Product provider, Investment house .lender etc., etc., etc, refused to be regulated there would be no story - no poiunt - no need for AIFA, FSA, FCA etc etc etc.
There are roses out there wake up and smell them.
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