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FCA bans ex-Keydata compliance officer but rules out £200k fine

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The FCA has banned and publicly censured former Keydata compliance officer Peter Johnson for failing to act with integrity and misleading the FCA.

Johnson had lodged an appeal with the Upper Tribunal against the regulatory action, but has since withdrawn his appeal. Upper Tribunal cases will still be held in relation to former Keydata chief executive Stewart Ford and former sales director Mark Owen.

The regulator says it would have fined Johnson £200,000 were it not due to serious financial hardship.

The FCA found Johnson failed to act with integrity as he knew Keydata had received advice that its financial promotions were unclear and misleading, but failed to take steps to address this.

Keydata had also been advised its due diligence was inadequate, and the Lifemark and SLS portfolios, which underpinned Keydata’s investments into life settlement policies, was underperforming.

The FCA says Johnson failed to take the recommended steps to improve its processes, and failed to ensure risks were managed effectively.

Johnson was also found to have failed to communicate the risks to advisers who sold Keydata products.

The regulator says Johnson “deliberately misled” the FSA when he called in for regulatory interviews, saying there had never been a product in paying income on the Keydata investments. This was despite the fact Johnson was aware of severe liquidity risks within the portfolio.

In the final notice, the FCA says: “The authority considers that Mr Johnson’s failings in this regard are of the most serious nature in light of the significant level of consumer detriment which has arisen from the sales of the products and the impact which this level of consumer detriment has had on the financial services sector.”

The collapse of Keydata in June 2009 prompted a £326m Financial Services Compensation Scheme interim industry levy in 2011.

Between July 2005 and June 2009 over 37,000 investors paid over £475m into Keydata products. The FSCS has since paid out over £330m to Keydata investors.

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Comments

There are 5 comments at the moment, we would love to hear your opinion too.

  1. When the poor and desperate are convicted of shoplifting, are their sentences waived owing to “severe financial hardship”?

  2. What about the financial hardship suffered by the victims of Keydata?.

    Quite staggering.

  3. do the fca add the £200,000 fine on to the rest of the industry and increase our fees???

  4. Some of the issues around or rather behind the more obvious headlines of what happened at Keydata have yet to be picked up on – not least how what happened was able to happen.

    The root cause of what happened is to be found at the top – an exceptionally lacking corporate structure and corporate / boardroom governance framework.

    I have little doubt that Mr Johnson was little more than a pawn in events: a poorly paid and rewarded one; one that wielded little if any power whatsoever in the boardroom (in fact he was probably ejected from the boardroom when anything juicy was truly discussed); and that he broadly just did what he was told or feared he had to do if he wanted to keep his job – including what he communicated and/or didn’t communicate to the FSA.

    That doesn’t excuse what he did and didn’t do – it just explains it. Few people have the mettle to stand up, especially if their simple / low’ish pay-grade job would be on the line if they did.

    It’s a shame he didn’t stand up to what was going on – but the scale of the FCA fines indicated the culpability: £200k to what was it? £75m?

    It was an astonishing scandal – that led to the biggest ever claim on the UKs FSCS – effectively perpetrated by no more than 2-3 people, with the cameo role backing support of the likes of Harrison and others, and a failure of anyone to do anything needed in a timely fashion, despite all the glaring issues.

  5. Of course the FCA did nothing wrong in their handling of the whole affair!?

    The only real beneficiaries here, as ever, were the Legal profession.

    As for losers: most consumers got there money back (+ small interest). Paid for by IFAs who in the main never had there voices heard, with individual suitability brushed aside by PI insurers when it came to the FSCS farcical attempt to claw back more money. Of course the increasing annual and interim levies where never enough. I think we should make IFAs pay for the banks dodgy PPI sales practices as well….. oh wait.

    Now the FCA admits IFAs were fed a pack of lies from Keydata in addition to their “unclear and misleading” brochures. Should IFA due diligence really extend to assuming all provider documents are lies? Surely this would be an unreasonable assumption in any court of law?

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