The FCA has banned and fined former Keydata finance director Craig McNeil £350,000.
Keydata designed and sold investment products to retail investors via IFAs.
The products were underpinned by Keydata’s investment in bonds issued by Luxembourg special purpose vehicles, including one called SLS Capital.
Following Keydata’s administration in June 2009, its administrators discovered that SLS had failed to make certain payments that were due to Keydata since early 2008 and that Keydata had instead funded £4.2m in income payments to investors from its own company resources.
The FCA says McNeil was aware that Keydata continued to make the payments and failed to ensure that Keydata reported the matter to the FCA or to inform the FCA himself when he knew that the matter had not been reported.
The regulator says McNeil also failed to challenge a decision in late 2008 to enter into a complicated transaction which attempted to obtain security for the missed SLS income payments.
He permitted the release of £500,000 of Keydata’s corporate funds without having a clear understanding of the transaction or its risks. Although Keydata paid the funds to the seller, Keydata did not obtain the security.
The FCA says McNeil failed to act with due skill, care and diligence in this transaction.
FCA acting director of enforcement and market oversight Georgina Philippou says: “The FCA relies on senior directors such as McNeil to let us know about significant risks in their firms, especially when they have a direct bearing on customers’ investments.
“It was not reasonable in the circumstances for McNeil to rely on the fact that other directors might eventually tell us what was happening. If hel had acted, and acted quickly, concerns about SLS may have come to light sooner. Further, as Keydata’s finance director, McNeil should have understood the risks of the transactions he was authorising.”
McNeil agreed to settle at an early stage of the FCA’s investigation and therefore qualified for a 30 per cent discount. Were it not for this discount, he would have been fined £500,000.
In a statement, McNeil says he reported to the regulator in a March 2009 financial return the payments made by Keydata to investors from its own resources.
He says: “From 2005, the FCA had substantial involvement with Keydata’s London and Reading offices. To claim that it was my job to tell them about the operation and the products is clearly untrue.”
Keydata’s administration prompted a £326m Financial Services Compensation Scheme interim industry levy in 2011.
In May the FCA published decision notices seeking to ban and fine Keydata founder Stewart Ford, former Keydata sales director Mark Owen and former compliance officer Peter Johnson.
All three individuals have referred their decision notices to the Upper Tribunal.