Adviser firm Financial Escape has agreed a 99 per cent settlement discount with the Financial Services Compensation Scheme over client recommendations to invest in Keydata.
Financial Escape’s annual results to the end of March, published on Companies House last week, show the firm paid £400 to the FSCS after an out of court settlement was agreed between the two parties. The FSCS had lodged an original claim against Financial Escape of £64,000, as part of its legal bid to pursue advisers to recoup some of the compensation paid to Keydata investors.
The results say the payment was made “in full and final settlement without acceptance of any fault or liability on the part of the company, its directors or employees”.
Money Marketing revealed the FSCS had offered at least one 99 per cent discount on Keydata liabilities in April. The full details of Castle’s discount can be revealed now the firm’s results have been published.
Financial Escape advised 12 clients to invest a total of £120,000 into Keydata, but the FSCS chose to pursue a smaller amount as part of its strategy of offering firms early settlement discounts.
Financial Escape recommended Keydata to diversify clients’ investments, and in most cases Keydata represented up to 10 per cent of a client’s portfolio. The company says it has not received any complaints from clients about its Keydata recommendations.
Financial Escape director Phil Castle says: “Our capital adequacy requirements are only £10,000. We notified the FSA when we received the letter from the FSCS that the legal costs of defending the claim would have exceeded our capital adequacy requirements. That does not seem just.”
An FSCS spokesman says: “The FSCS must pursue recoveries wherever reasonably possible and cost effective to do so. We are pursuing recoveries from firms in connection with the Keydata products and are confident that a court will find in our favour if the matter proceeds to trial.
“However, the FSCS must also be pragmatic and commercial in its approach and accordingly, taking account various factors such as the financial position of a firm, an agreement may be reached for settlement of the claim for less than its full value.
“This does not reflect the FSCS’s views of the merits of the claim, but rather its obligation to only pursue recoveries where it would be cost effective.”