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Advisers question FSCS stance on non-Isa Keydata claims

Advisers have questioned the inconsistencies in the Financial Services Compensation Scheme’s decision not to compensate non-Isa investors in certain Keydata plans after indicating it would pay out on most equivalent Isa investments.

According to the Keydata Victims website, several investors in Keydata secure income bonds 1,2 and 3 have received a rejection for compensation for their non-Isa investments on the basis that FSCS is unable to establish that the apparent misappropriation of the underlying assets results in any liability on Keydata’s part.

The FSCS insists it is dealing with claims on a case by case basis but is unable to confirm how many standalone non-Isa claims have been successful to date.  It has paid approximately 3,000 Keydata claims and rejected approximately 130.

An FSCS spokeswoman says: “We have been able to conclude, on the basis of the evidence currently available to us, that Keydata breached contractual and other legal obligations owed by it giving rise to a claim for damages by most (if not all) Isa investors. Although we consider that it is possible that Keydata breached contractual and other legal obligations owed to non-ISA Investors, we cannot be sure on the evidence currently available to us that any such breaches caused a loss giving rise to a valid claim for damages.”

According to administrator PricewaterhouseCoopers, there are 4103 Isa investments in SLS Capital and 1973 non-Isa (direct) investments totalling £103m. It says there are 5,500 investors with one or more investments in SLS and has estimated direct investors to total around 1600.

AWD Chase de Vere senior manager Jason Walker has questioned the inconsistency of the FSCS’ approach to the claims.  

He says: “The only claims that appear to have been successful are when the client has done both an Isa and directly but not just a direct investment. 

“I struggle to understand how they have rejected the claims based on their reasoning.  If you pay out on an Isa because it was marketed as an Isa and this was misleading as it turned out to be non-compliant and you pay out on Isas and direct investments based on the fact again it was marketed as an Isa you can further the argument on for people who invested directly.  These people looked at the product, saw it was Isa-able and didn’t invest through an Isa but still felt that it was regulated and adhered to the necessary rules and was safe.” 


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There are 4 comments at the moment, we would love to hear your opinion too.

  1. Christopher Wicks 22nd March 2010 at 12:53 pm

    This is typical of the bizarre way in which the FSCS goes about things. I wonder about the calibre of the staff that they employ. Their reasoning at times seems bizarre to say the least.

  2. Never Too Old To Rock 22nd March 2010 at 1:43 pm

    ‘Confusion’——-Electric Light Orchestra

  3. “FSCS is unable to establish that the apparent loss of the underlying assets results in any liability on Keydata’s part”

    “we cannot be sure on the evidence currently available to us that any such breaches caused a loss giving rise to a valid claim for damages”

    Does this have “wider implications” for IFAs in other investment products which may have resulted in loss for which the adviser does not have “legal liability”?

    If so then why does the FOS, sorry Financial Ombudsman Service not operate on the same basis?

    On the subject of firms who did sell Keydata products should they now be providing more evidence to the FSCS and advising their clients how to present a claim to the fund of last resort? But why should IFAs who refused point blank to sell (or advise upon) these products be expected to pay up?

  4. The failue of Key Data seems to be based on issues concerning that company’s incompetence.

    Unless there was a gross failing in the advice process, targeting the firms who recommended these products based on the information provided by Key Data is iniquitous.

    A decision to award against a firm based on an arbritary 20% would also be asinine.

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