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Keydata casualty bought out of admin- up to £6m costs stay with FSCS

Target Financial Management has been bought out of administration by Million Plus Financial Planning, an IFA firm led by former TFM managing director Mike Cleary.

Last week, Money marketing revealed TFM was entering administration after the Financial Services Compensation Scheme had pursued the firm over claims relating to Keydata.

The FSCS is chasing the firm for £1m in claims relating to Keydata’s SLS products but administrator PricewaterhouseCoopers says the firm’s total exposure to Keydata claims is £6m.

It is understood Million Plus FP bought the firm for a minimal sum. It will not be taking on any liabilites.

Cleary was the managing director of TFM between September 2010 and June 2011. He was previously a director of Foster Denovo and was chief executive of Berry Birch & Noble Financial Planning between 2003 and 2005, before the firm’s permissions were cancelled due to capital deficits. BB&NFP was placed in default by the FSCS in 2008.

The FSCS will now have a claim on any remaining TFM assets as an unsecured creditor but any payout is likely to be small.

In October, law firm Herbert Smith wrote to Keydata distributors on behalf of the FSCS to kick-start the legal process of recouping compensation paid to Keydata claimants relating to SLS products.

In January, the FSCS imposed a £326m interim levy on the industry, mainly to cover claims relating to Keydata Lifemark products. Advisers paid £93m while fund firms paid £233m.The FSCS has not begun attempting to recover Lifemark payments yet.

The deal means TFM’s client book, regional offices and associated trail commission will pass to Million Plus FP. The firm says it is negotiations to re-employ a number of TFM’s staff and has agreed to pay their November salaries.

Better Capital chairman Jon Moulton and Largemortgageloans.com managing director Paul Welch are investors in Million Plus FP.

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Comments

There are 18 comments at the moment, we would love to hear your opinion too.

  1. so a firm that has failed due to its inability to meet its financial commitments, in addition to the keydata liabilities, has been bought by a man who ran a firm that was shut down due to capital deficits.
    Yep, I reckon RDR has been a huge success!

  2. Begs the question as to how or why the FSA would even think of granting any type of authorisation. If they do or if they already have then it makes a total mockery of the entire system. But then Hector has never been responsible for any of the mistakes made within the FSA in his tenure or am Ibeing a bit harsh???

  3. Peter Davies @ Create Wealth 6th December 2011 at 9:18 am

    This is shocking. How can he be allowed to do that?

  4. PWC obviously marketed the assets to ensure the best price was obtained for creditors…

    …and the FSA will take what action against the individuals involved…..

  5. Peter Davies @ Create Wealth 6th December 2011 at 9:19 am

    Anonymous – what has this got to do with RDR?

  6. Yep, Cleary seems to be associated quiet abit with faield firms….

    ….Perhaps the FSA should consider someone’s history when approving someone?

  7. So this man, who appears to be a serial dumper of liabilites onto the FSCS, is allowed to continue to be authorised?

    Madness.

  8. FIT?

    Probably, done nothing illegal, just par for the course. Did Tawdry Law do something similar?

    Come to think of it the regulators keep doing it, going to do it again soon.

  9. In such circumstances, why can’t the trail commission be purchased by the companies providing trail, in exchange for a lump sum, or lump sums in tranches maybe. Could be a much cleaner way of resolving such matters in the future, unless of course the FSA’s focus on our trail commission earnings continues to blinker their view.

  10. God, I wish I was clever, devious and amoral, so that I could dump all my commitments on the rest of the industry.

    Not that I consider the Keydata farce the responsibility of anybody other than the FSA.

  11. The system is obviously far more corrupt at the top than in the field.

  12. Brilliant piece of business, pick up a business for peanuts and leave the Liabilities with FSCS / IFA’s and have the FSA authorise this!!!
    Are we now working in an industry where this madness is becomming the norm…you just could not make it up.

  13. Attempting to be impartial for once..
    It may be Mr Cleary had nothing to do with BBN and TFM ‘failing’ – and was just in the right place at the right time to pick up a bargain (i.e. all those TFM clients for basically nothing).

    …The Question is – which management of TFM ‘failed’ and has the FSA flagged them up as being not fit and proper?

    and how comes Mr Cleary seemed to be able to buy TFM out of Administration – so quickly?

    – and why did PWC allow this without seeing if a better offer from an established firm was forthcoming?

  14. If it looks like fish, smells like fish, then it s 6th December 2011 at 2:01 pm

    He reaps the rewards of picking up a mass of clients and trail overnight for a song whilst the rest of us foot the FSCS bill.

    As part of the winding up process and removal of the firms Part IV permissions, the FSA ask what will happen to the assets. I believe the firm is not allowed to dispose of the assets until the FSA has given approval. This means the FSA must have been aware of the deal prior to it happening. On that basis, it raises two questions;

    1. What evidence has been provided to show that fair value has been paid for the assets.
    2. Why are these sales not made public so all companies can bid for the assets

    There should be a full investigation into the role of the FSA and PWC in this, along with an independent valuation of the assets.

    .

  15. I’m guessing but how about this for a possible scenario?

    Firm in trouble and knows it

    Cleary leaves TFM, sets up Newco and gets authorised

    TFM hits the skids and Newco buys the assets at bargain basin price. Neat, dumps liability on FSCS and presumably makes a fortune for the new owners and management.

    Yeehagh – just like the wild west!

  16. Whenever a company gets into trouble, the assets invariably go down for a knock down value. A distressed sale if you like. And the longer PWC take to find a buyer the more the administrator’s costs rise. But it does show how useless capital adaquacy is in practice.
    What is sad is that you can take on the business without any commitment to look after the clients even after the RDR.

  17. Checking the FSA register, Million Plus FP was first authorised on 14th November 2011. It has no RIs yet but the contact details are for the ex-Director of Target Financial Management. Target goes into administration on or around 28th November and the Million Plus takes on the assets without the liabilities after a very short time. Sounds like something smells bad around here.

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