High Court grants Fatchett judicial review of FSCS
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Regulatory Legal has been given the go-ahead to launch its judicial review against the Financial Services Compensation Scheme’s £80m interim levy after the High Court ruled it had an arguable case.
This week’s Money Marketing reveals a High Court judge has ruled Regulatory Legal’s grounds for judicial review raise arguable points and a hearing is likely this autumn if the law firm can raise the necessary funds.
Regulatory Legal submitted grounds for judicial review in April on behalf of 221 adviser firms, against the levy imposed on investment intermediaries for claims relating to Keydata, NDF Administration, Defined Returns, Arc Capital and Income and two failed stockbrokers. Keydata was categorised in the investment intermediation sub-class for FSCS purposes despite being widely regarded as a product provider.
The High Court this week ruled Regulatory Legal’s grounds raise arguable points on whether the FSCS’s categorisation of Keydata “erred in law or was otherwise flawed on public grounds”.
The judicial review will look to ascertain that the FSCS misunderstood the nature of Keydata’s activities when it allocated the costs of claims to intermediaries rather than providers.
In May, Aifa announced it would not be pursuing legal action against the levy based on legal advice it sought which suggested a challenge was unlikely to stand up in court.
FSCS maintains its interim levy was issued in accordance with the rules set by the FSA and Keydata costs were correctly allocated based on legal advice from US firm Bingham McCutchen.
An FSCS spokeswoman says: “The FSCS is disappointed that Regulatory Legal has been granted permission to continue its challenge against the FSCS interim levy. The FSCS recognises the application raised difficult issues about our funding but remains confident of success at the full hearing.”
Regulatory Legal has raised £40,000 but estimates it will need £150,000-£200,000 more by the end of July to fund proceedings. Partner Gareth Fatchett (pictured) says if 1,000 advisers contributed around £200 each this would pay for the action. He says IFAs may be forced to pay a further levy for Keydata if Lifemark investors suffer significant losses.
He says: “We face an avalanche of adverse costs from the FSCS’s lawyers and need support from IFAs who wanted to wait until the High Court granted permission. We now have that permission and face a landmark trial against the regulatory bodies.”
Ex-FSA lawyer and Barlow Lyde and Gilbert regulatory specialist Chris Brennan says: “Around £200,000 does not seem an unreasonable figure given the narrow basis on which it appears they are intending to appeal.”
For more see this week’s issue of Money Marketing.
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Readers' comments (20)
Anonymous | 30 Jun 2010 9:10 am
All firms need to considr what will happen if or when the FSCS actually start to pay out for the Keydata debacle. What has been paid so far I think was only to cover the HMRC tax issues (£%million I think) and if you go to the Keydata victims website you will find that the proverbial is still to hit the fan as far as claims are concerned and we are talking in the £100 of millions there perhaps.
If the FSCS is not challenged (or the judicial review does not succeed), then the interim levy firms got earlier in the year could prove to be peanuts compared to what is to come
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Ken Davy | 30 Jun 2010 9:28 am
Whilst this is only the skirmish prior to the real battle it is an important milestone and offers some hope that natural justice will ultimately prevail.
What Regulatory Legal will need NOW is financial support from all IFA firms across the country.
I have no connection with Regulatory Legal but urge you to support them in this action. Win or lose it is a fight that I believe needs to be fought and fought well.
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Anonymous | 30 Jun 2010 9:33 am
Maybe an insignificant question but why did theFSA/FSCS refer to a US firm for advice?
By the way, I am surprised that it seems most people are still to be compensated for the Keydata issue. I used them once only (thank God) for a client that was in need of an high income form a very small sum (£7,000) ISA. When this blew up I helped her make a claim and she was paid out nearly £6,000, (plus she had received her income for four years), a few months ago now. So at least she did not suffer any losses and neither did I (except for my pride being damaged for recommending keydata in the first place.
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Bill Wells | 30 Jun 2010 9:40 am
It is obvious to a blindman (but not the FSCS) that KeyData does not proffer advice - it 'manufactures' products.
Unfortunately, until now, if a regulatory body insists that black is white we have been forced to agree.
It shouldn't be necessary in a just world to fork out £200,000 in legal fees simply to have an unjust, illogical, politically motivated decision, overturned. But if that is what it takes then the IFA community must back this action.
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Anonymous | 30 Jun 2010 9:46 am
I am writing my cheque already.
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Alan Parkinson | 30 Jun 2010 10:11 am
All IFAs should back this case, as success will set an important precedent that will have far wider implications for the regulatory hierarchy
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Simon Webster | 30 Jun 2010 10:19 am
Anonymous - we have a couple of Keydata "victims" one of our advisers sold ISA's that "seemed like a good idea at the time". We have struggled to get any help or advice from anyone and I would love to better understand what you did for your client. Could you email me, sw@fffp.co.uk with your number and please spare me a few minures to put some flesh on the bone. I woud really appreciate it
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Julian Stevens | 30 Jun 2010 11:04 am
I think I shall be supporting this, as such a manifest and massive injustice against the IFA community has to be challenged.
RDR next.
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Gareth Fatchett | 30 Jun 2010 11:15 am
If people want the support this please email me.
gareth.fatchett@regulatorylegal.co.uk
I will send the Grounds, the judgment etc.
I am going to bug people all July to support us. I am failing to understand why any IFA would not run with this !
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Anonymous | 30 Jun 2010 11:42 am
Whilst obviously it will depend on the final result this would appear to be an enormous own goal by AIFA. It does seem to add fuel to the fire for those who have argued that as a trade body they have not had their eye on the ball in recent months.
May be just as well Mr C is on his way.
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