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AWD Chase de Vere to be lead case in FSCS Keydata legal battle

Ponzi Scam Fraud Gavel Law 480

The Financial Services Compensation Scheme’s legal battle to recoup compensation from Keydata advisers is likely to see AWD Chase de Vere named as one of the lead defendants in the case.

A case management conference has been held this week to determine how the FSCS’s legal action against Keydata advisers should proceed.

It is likely around six lead defendants will be selected, with the remainder of the cases stayed pending the lead cases’ outcome.

Money Marketing understands there are around 500 adviser firms being pursued by the FSCS, relating to about 1,500 Keydata investors. Law firms for the parties are currently agreeing a draft order to be submitted to the judge, who will then issue an order setting out the next steps for how the case will be heard.

The order will not identify the names of the lead defendants, but it is thought AWD will be one of them as it has the largest claim against it.

A spokesman for AWD declined to comment on the case, except to say the company will continue to “robustly defend its position.”

Money Marketing understands discussions at the case management conference have centered on the key issues to focus on to establish whether advice to invest in Keydata was negligent, and the criteria selection for lead cases.

The case appears to be hanging on whether Keydata is deemed to have been a fraudulent operation or not. The FSCS has argued advisers should have carried out a certain level of due diligence before recommending Keydata, but the counter-argument has been that if Keydata was fraudulent due diligence would not have uncovered this.

The FSCS has so far failed to answer questions about whether Keydata was fraudulent. Asked by the judge to address the specific point about whether the company was fraudulent or not, the FSCS replied it did not know. The FSCS was challenged on this point by one of the defendant’s lawyers who claimed the FSCS had carried a statement on its website saying Keydata was fraudulent.

The order, expected in the coming weeks, is likely to require the FSCS to address this point.

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Comments

There are 10 comments at the moment, we would love to hear your opinion too.

  1. If ever there was a case illustrating how the law is an ass, this must be one of them.

    So these large firms, who of course will provide the largest amounts of money if (when?) found culpable are to be the template from which it will be assumed that everyone else is also automatically guilty. That circumstances, clients, advice and goodness knows what else is different – that will count for nothing? This is justice?

    Of course I hope these firms engage the very best legal advice. They may well have provided poor or unsuitable advice, but I do hope that the failings of the Regulator will also be taken into account. – No Arrow visit. No publication of their knowledge that KPMG refuted the claims made in the prospectus. Why it is that KD is considered an adviser rather than a provider? Is this valid? Then there is the application of hindsight. Then of course there is the interesting point – what if Mr Elias hadn’t absconded with the money? Would we be in this position? Is it right to take a ‘broad brush’ approach and merely assume that all are guilty? Shouldn’t this be reviewed on a case by case basis?

    I know this isn’t helpful, but in this case I do hope the FSCS and their mentors at the FSA take a thorough drubbing and are severely ticked off by the judge. Wouldn’t that be a laugh?

  2. There will no doubt be a lot of legal jargon and rhetoric spouted during this case but the BASIC facts remain unaltered.

    1. Keydata were in default therefore the FSCS got involved.
    2. The “misappropriation” of the assets was an act of criminality and involved the Serious Fraud Office
    3. the FSA inspected Keydata and did not it seems find sufficient of concern to prevent them to continue marketing their products
    4. The actuarial model and the asset class has come under much scrutiny since this debacle – but the fact remains that losses would not have been anywhere near the level that occurred had the funds not been stolen – this is nothing to do with IFAs.
    5. the compensation scheme levy on advisers and insurance firms is irrelevant in judging this case, although many whiners will no doubt try to muddy the waters with this argument of “you had it coming”

    Will the FSA be held accountable for failing in its duty of care to advisers of being a good watchdog and highlighting the risks and concerns they “apparently” had before all this blew up? Not a chance. Will parallels be drawn with advisers and the FSA and the fact the FSA approved the plans as ISA compatible when in actual fact they weren’t? Not a chance. Will we never see another similar case in the future now we are under the banner of the new shiny FCA?? Of course we will. Life goes on but the bureaucrats continue to duck all responsibility and park it all at the door of the humble IFA – such it has always been and sadly such it always will be.

  3. You can look forward to AWD cutting a deal at the court gates, mark my words, I doubt if they could win the arguement as the courts are not favourable to IFA firms in general and as a rule of thumb, if you are an IFA and you go to court, you are regarded below the level of a back street second hand car salesperson.

  4. @ Harry Katz

    I think you malign the law too easily. Judges aren’t stupid. You only have to read a few High Court judgements to know they are intelligent, incisive and reasoned in their decisions.

    This test case is about establishing general points that will be common across all cases. For example, whether there was fraud. That way they will not need to be argued each time and the judges in later cases can get on with the facts of the indiviudal cases – in exactly the way you would expect and require.

    The law can be an ass but there are more asses in ‘assume’…

    All your other points, as usual are well made. Have a great Easter.

  5. How many firms have already settled I wonder?

  6. `@anonymous 3.19

    I saw recently that a business with more than 100 advisers settled but with an 85% discount. Hardly an admission I suspect. More like a: Sod off and leave me alone.

  7. RegulatorSaurusRex 28th March 2013 at 5:42 pm

    @ Richard

    More like “we don’t have any money”?

  8. @ Grey Area

    Judges are indeed not stupid – I have several as clients (one in the Supreme Court). However it is sometimes had not to think so – the case of al Qaeda springs to mind. But the law isn’t confined to judges. This whole issue is being dragged out and we will be lucky to see a conclusion and closure for a few years yet. As they sat the Wheels of Justice grind exceeding slow. The lawyers live in their own ivory towers and are for the smaller intermediary unapproachable. As they say justice delayed is justice denied. Never truer in this case.

    You too have a good Easter. I’m off to OD on chocolate (with a large Brandy!)

  9. Our accounting period ends this weekend. We are a limited company and will have to disclose that as we had NO client complaints with regard.Key data, HS pursuit resulted in us settling for less than .3% so their travel costs will have exceeded what they recovered without admission of fault.
    For most Ltd Co IFA firms, by law, the accounts will put this travesty in the public domain BEFORE the court case against Chase Dr Vere.

  10. A representative of HS complained that advisers were using a “generic defence” ie, fraud caused the losses.
    Strange when one considers the FSCS are using a generic accusation of misselling against all advisers.

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