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MM Leader: Shining a light on role of FSA

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The Keydata saga took yet another twist last week when Moneymarketing.co.uk revealed the firm’s founder Stewart Ford had been granted a judicial review into the FSA’s investigation.

In a strongly worded statement, Ford said he has “serious concerns” about the way the investigation was conducted and suggested the FSA should be held accountable for its “illegal conduct”.

The FSA is at an advanced stage of its investigation into Keydata. It is likely to take the strongest action possible against anyone associated with the failure that it finds culpable.

Judging by the amount of money Ford made from Lifemark and Keydata, he is not short of cash and it is likely a High Court battle, and any resulting appeals, could see the FSA’s conclusion delayed for a considerable time.

Any delay in truly getting to the bottom of who was to blame is regrettable but the judicial review may shine a useful light on the role of the regulator. Ford and the other directors of Keydata certainly have some serious questions to answer regarding their responsibilities for what occurred at the firm and the two investment vehicles, Lifemark and SLS Capital.

But it is also right that the role of the regulator, which has had such a dramatic impact on proceedings, is examined to ensure it conducted itself properly.

An independent review of the Keydata debacle, examining the role of key players, including the FSA, is the preferred route to getting all the answers IFAs and investors want. But until this is commissioned, the judicial review may offer a useful platform.

The FSA will be hoping its blunder of leaving a sensitive report into Keydata with the neighbour of the firm’s director Mark Owen is an isolated incident and not indicative of other mistakes Ford will look to expose in his judicial review.

Low point

The Pension Protection Fund has this week confirmed that it will include the investment risk of a scheme’s portfolio when calculating levies.

The idea of risk-based levies should be fed into the FSA’s upcoming review of the Financial Services Compensation Scheme to help ensure that decent low-risk IFA firms pay less for the mistakes of other higherrisk sectors.

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Readers' comments (4)

  • "Judging by the amount of money Ford made from Lifemark and Keydata, he is not short of cash"

    Unlike everybody else who got involved.

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  • More delay, why? The FSA is immune from prosecution so would the money Ford is spending on lawyers be more welcome in the pot of compensation that the FS industry is being bled to death by?

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  • Quote: " The idea of risk-based levies should be fed into the FSA’s upcoming review of the Financial Services Compensation Scheme to help ensure that decent low-risk IFA firms pay less for the mistakes of other higherrisk sectors."

    Why stop there? Should clients themse;lves not be made aware of the risks they may face.

    Read the PPF paper - the variation on levies based on risk arises from the portfolios chosen by the pension fund itself - the client.

    I offer an extract from my earlier article in MM back in February:

    Clients understand, nearly instinctively, why the “price” of insuring an 18 year old Subura Impreza driver will be higher than a 55 year old Ford Escort driver - they know one carries a higher risk. When you ask them about their attitude to risk - do they understand, really understand the risks - do those who invested in Keydata?

    What if they were given a “price” to insure against the risk - and the price quoted for Keydata was much higher than alternatives - would they not then better understand the true nature of such risks?What prompts all the complaints in these columns? Is it the “price” of regulation, is it the “price” to be paid out for compensation after the FSA fails?

    In a market economy there is perhaps no better signal than that of “the price” - the evidence is all around. It is perhaps time that lessons were drawn from it and instead of just complaining, ideas for change debated.

    From here:

    http://www.moneymarketing.co.uk/a-radical-solution-for-fscs-funding?/1025479.article

    The decisions of the PPF confirm the need for a debate - but wider than just the market - it should directly involve the client.

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  • We can bet that the FSA will fight tooth and nail, whatever the cost (to us), to wriggle out of culpability.

    It's all very well for the FSA to talk ominously about taking "the strongest action possible against anyone associated with the failure that it finds culpable" but, as usual, we can probably discount from that anyone within the FSA itself. Even the FSA wouldn't have the gall to do another Clive Briault ~ would it?

    At the root of all this, as always, is the issue of accountability, or rather lack of it when it comes to anything that the FSA either does or doesn't do. It would be interesting and possibly useful to know AIFA's position on the matter, given that a fair proportion of its membership may have been affected in one way or another. But from them we hear nothing.

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