Last week, the Serious Fraud Office announced it had found insufficient evidence to secure a prosecution in relation to Keydata.
However, debate over who is to blame for the debacle is likely to intensify in the coming months.
A recent Frequently Asked Questions briefing from the FSA acted as a staunch defence of the regulator’s actions in applying to put Keydata into administration in June 2009.
Following the administration, administrators PricewaterhouseCoopers discovered that £103m may have been misappropriated from Keydata investment vehicle SLS Capital, with the trail leading to deceased businessman David Elias. The SFO was unable to shine any further light on the matter.
The FSA’s investigation into Keydata and its founder Stewart Ford is at an advanced stage. Ford says the decision to put Keydata into administration caused the liquidity problems at Lifemark. The FSA insists the investment vehicle had liquidity problems before it took any action against the firm.
Question marks have also been raised about whether the FSA should have acted sooner. KPMG warned the regulator in 2005 about the misuse of its name in marketing literature while the FSA itself raised concerns about the suitability of advice around certain Keydata products in 2007.
We await with interest the FSA’s upcoming report into the Keydata saga. However, particularly given the accusations of regulatory failure associated with the Keydata debacle, an independent review into the matter should also be conducted to ensure we truly get to the bottom of what went on and who is to blame.
Lloyds Banking Group’s new chief executive António Horta-Osório set a fine example in withdrawing from the judicial review brought by the British Bankers’ Association against the FSA and Financial Ombudsman Service and making provision for £3.2bn compen-sation to be paid to customers.
Barclays followed suit and the BBA subsequently announced it would not be appealing the decision to reject its judicial review. As the biggest PPI offender, Lloyds was a lead player in pushing for the judicial review under previous senior management. Let us hope this fresh thinking continues into other areas of the group’s business.