FSCS sets date for decision on Lifemark compensation
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The Financial Services Compensation Scheme will ann-ounce in September whether Lifemark clients will be able to claim for compensation.
Around 23,000 Keydata clients have invested about £349m in Lifemark, which has halted income payments to preserve liquidity and maintain the value of the policies.
In an announcement last week, the FSCS says it has been carrying out investigations to learn more about what has happened, what it means for investors and whether the FSCS will have a role in compensating investors for any losses.
The announcement says: “In particular, we have been considering whether Keydata is legally liable for any capital losses that may arise for investors in funds backed by Lifemark and whether we can pay compensation.
“These investigations are now at an advanced stage and we hope to be able to confirm our position in relation to the potential liability of Keydata during September.”
The FSCS says it has been consulting with the FSA, Keydata’s administrators PricewaterhouseCoopers and the other parties involved in the restructuring proposals.
It adds: “There is currently uncertainty around when the parties will be in a position to update investors on the timing and terms of any proposal. While this remains unresolved, it is unclear what losses investors may suffer.
“We will continue to monitor the situation and consider the implications for any compensation we may pay.”
US hedge fund CarVal is understood to have recently provided Lifemark with short-term funding to help sustain the company and preserve the value of policies held by thousands of Keydata investors.
CarVal is thought to have proposed a £0m loan to Lifemark to pay premiums and return original capital to inv-estors over a 14-year timeframe, depending on the performance of Lifemark assets. However, reports suggest this deal may have fallen through.
Lowes Financial Management managing director Ian Lowes says: “It may prove to be the case that the losses on Lifemark are the result of investment risk gone wrong. But if the literature is shown to have not properly explained how the products worked behind the scenes, we have seen enough precedence for compensation.
“Advisers have recomm-ended this in good faith and if the product was not correctly explained in the literature, it could end up with the FSCS.”
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