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Déjà vu- Keydata under review

Questions have been raised over regulatory standards after it emerged that Keydata was reportedly subject to scrutiny by the FSA eight years ago over potentially “misleading” Isa guides.

According to a Scotsman report, Keydata was on the regulator’s radar as long ago as 2001 as it was “annoyed” the firm did not offer clear information about the product it was selling in an IFA-sponsored Isa guide.

The report, dated July 30, 2001, quotes an FSA insider who said that major charges and penalties were not highlighted.

It says the guides promoted a so-called “protected” Isa devised by Barclays bank and that Keydata was instructed by the FSA to write to 500 investors who took the guide’s advice and offer them the chance to cancel their investments and be reimbursed.

When questioned on the issue by Money Marketing last week the FSA refused to confirm or deny the report.

Concerns about Keydata’s sales practices reared their head again years later as the regulator was understood to have concerns that the firm’s sales contact with IFAs was at arm’s length on complex products prior to its insolvency.

In June, Money Marketing reported that the FSA was understood to have been worried about Keydata’s outward-bound telephone approach to distribution used by sales staff on more complex products such as those linked to traded life policies.

Keydata is understood to have deployed regional sales staff last year to deal with more complex business with IFAs as a way of addressing the issue.

The FSA confirmed that Keydata’s tax problem came to light while it was already investigating the firm, but would not say when the probe began.

When quizzed in recent weeks about regulatory oversight at Keydata, the FSA says the discovery of non-Isa compliant plans are a matter for HM Revenue & Customs who is responsible for monitoring Isa status.

That may be the case, but if the FSA had concerns about Keydata’s sales practices eight years ago, shouldn’t closer attention have been paid more widely to the firm and its products by the authorities?

And if alarm bells had rung back in 2001, how has it taken eight years for other problem Isa products to be detected?

Let me know your thoughts by clicking on the link below.

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Comments

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

  1. Norman Hedges, IFA. 3rd August 2009 at 4:27 pm

    Keydata and the FSA (and HMRC)
    I have written to my MP to raise precisely this point (8 years!). I have invited my clients to do likewise. The ISA status of my clients’ investments is very important and should not have been at risk from such incompetence. Come maturity of their 5 year plans will they be able to transfer to another ISA provider? I believe that HMRC must allow “special case” treatment, but my clients need re-assurance now.

  2. Déjà vu- Keydata under review
    Well, that knocks pretty squarely on the head any notion that the FSA might be remotely up to the task of regulating products. Not that I ever subscribed to that particular proposal, but this business over KeyData is surely yet another nail in the coffin of the FSA. Pretty soon, there’ll be more nails than coffin.

  3. The Mystery Shopper for IFAs 3rd August 2009 at 4:40 pm

    Rubbish Regulator
    More proof that they all should be sacked and sent to the dungeons where they all belong.

  4. Keydata
    The whole “Keydata” episode has highlighted a number of problems that should be urgently addressed.How can HMRC consider withrdrawing ISA status from a fully regulated product.I have tried to find out who has made these decisions as this not only affects small investors but others that have transferred many years worth of ISA/PEP allowances and now face uncertainty.The Revenue should allow all those affected to maintain their ISA status as investors have to maintain their contracts until maturity and face taxation issues either on income going forward or profits on maturity.The FSA who are supposed to “protect” investors should hang their heads in collective shame.Also “shielded” by the veil of anonymity they have hung advisors out to dry.We are distracted in the middle of a recession whilst nervous investors rely on us to glean”crumbs” of information from PwC who really do not have a clue as to the impact that their inability to effectively deal with this fiasco is having.Bring an IFA in to help with this,as every statement they produce provokes more questions that they don’t have answers to.

  5. Regulation-regulation -regulation
    I think the following quotation from Hector Sants (from about ten days ago I believe) sums things up pretty well. They still don’t understand that they were wrong and that a lot of the problems we now face were exacerbated by their incompetence.

    ‘I hope that regardless of any changes to the high-level regulatory architecture in the UK that the culture, the people and the operating model that we have created here at the FSA will continue to provide the effective supervision that society requires.’

    If what we have seen to date is ‘effective supervision’ then what happens when things go wrong?

    The FSA will not take any responsibility for anything and Hector Sants pleading for the jobs at the regulator is pathetic. The FSA has been found wanting and should pay the price by being closed down, as the Conservatives propose.

    There is nothing left for Hector Sants and Adair Turner to do but go. I would like to think that they will do so with some dignity but this is unlikely with their present mindset.

  6. Why does it say
    “Authorised and Regulated by the Financial Services Authority” if firms appear to be authorised only?
    We record all our client meetings. It could be interesting to extract clients observations and thoughts on the FSA and it’s failure to regulate and to have it compiled in to one recording. Perhaps we could have it made in to a short film with Wallace and Gromit. At least that way we could all hav a bit of a laugh instead of weeping over this mess.

  7. 5500 customers still whistiln’ in the wind
    In the absence of any real information from the authorities investors can track this fraud at a blog at keydatavictims.ning.com

    The real story here is that 5500 consumers have been told their collective investments of £103M have gone missing. The fact that they invested in a firm regulated and authorised by the FSA is a side issue (sadly). The FSCS are silent, HSBC (trustees), Fortis (Custodians) and KPMG (developed model) are also silent. Hmmm

  8. Keydata/David Elias
    If the FSA have been monitoring Keydata for the last 8 years, then surely alarm bells would have started to ring when they discovered the close association between Keydata’s owner, and a certain David Elias? (A close association which has been ongoing throughout most of Keydata’s history?)

  9. FSA not fit for purpose
    It never was. Keydata is just another example of the FSA being asleep at the wheel at best, incompetent as a middle order or highly influenced by large players at worst. Whatever the reason for the succession of failures, it all proves one thing, that the FSA has little regard for the consumer but a blind eye for the corporations. Meanwhile, back at where consumers DO get good advice and value, the IFA is becoming an endangered species and the FSA fiddles with yet more regulatory claptrap to isolate and marginalise us. Which, I hope is their last desperate death throws akin to rearranging the deckchairs on the Titanic.

  10. having just written a letter to the FSA, asking for information about the work the FSO are supposed to be doing re keydata, iv’e written to three e mail addresses all have been returned ,i also wanted info re the FSCS whether they will deem keydata in default, but seems they have shut down their web sites, because i can’t get through at all …p.jackson,, strange !

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