Advice firms which could become new lead defendants in the Financial Services Compensation Scheme’s battle to recoup Keydata compensation are considering sharing legal costs as it emerges that information on what the FSA knew about Key-data could have a bearing on the case.
At a case management conference held earlier this month, the court discussed advice firms sharing legal representation to keep costs down. The FSCS is seeking to recoup up to £75m out of around £400m paid out in Keydata compensation.
It has settled with all six lead defendants that it selected as test cases last year and is currently seeking new lead defendants.
At the conference, the FSCS’s request for each defendant with a claim worth over £150,000 to be a potential lead defendant, and dropping the requirement for lead defendants to have insurance and legal representation, were approved.
Money Marketing understands there are 74 firms with claims worth over £150,000.
The court said it may be necessary for the lead defendants to instruct one firm to represent them and share the legal costs.
Michelmores associate Jonathan Kitchin, who is representing an adviser in the case, says: “The sharing of costs should enable all firms to defend themselves properly and negotiate from a stronger position in any potential settlements.”
Kitchin says information on what the FSA knew about Keydata and when, revealed through Freedom of Information requests earlier this month, may also strengthen firms’ positions. A cache of FoI documents showed that the regulator had been investigating Keydata and its products for three years before its collapse in June 2009 but did not alert the market to potential problems.
The managing director of one advice firm in the potential pool of lead defendants, who wishes to remain anonymous, says: “If the FSA withheld information about Keydata then that puts advisers in a stronger position because if it had gone public with its concerns, misselling would never have occurred.”