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FCA cleared in Keydata compensation complaint

The FCA has been cleared in a complaint where it was criticised for not making sure clients who had invested in collapsed life settlement scheme Keydata were contacted about making a claim for compensation.

The clients of the complainant were also clients of another firm – called firm X in the complaint. After a FSA skilled person’s review in 2010, the then-regulator said the clients were part of a group of people who might have received unsuitable advice.

The FSA wrote to the firm in February 2011 to ask it to contact one of the clients, Mr X, to see if he had received compensation from the Financial Service Compensation Scheme for his investments in Keydata. The regulator was in contact with the firm between February and June 2011 to discuss setting up a redress programme for affected clients.

Keydata: From start to (almost) finish

The complainant says the firm didn’t contact the clients and when it later went into liquidation, the liquidator also did not contact the clients.

The complainant alleges the FSA did not take sufficient care to make sure the firm and liquidator contacted his clients. The complainant also alleges that delays in contacting his clients meant that their claims to the professional indemnity insurer were made too late and, by the time they did claim, the fund had run out.

In a May 2017 letter, the FCA did not uphold the complaint. It said the responsibility for contacting clients lies with the firm and the liquidators.

The complaint was then passed to the Complaints Commissioner, who agreed the complaint should not be upheld.

The Complaints Commissioner decision says the liquidator contacted clients in August 2011 at which point they should have been aware the firm was in liquidation.

The decision says: “Your clients’ complaint depends upon the assumptions that the FSA acted unreasonably, that it had a duty to contact clients directly, and that it was liable for clients’ losses. In my view, none of those assumptions is correct.”

It adds: “The FCA acted reasonably in engaging with the firm to ensure that there was a mechanism to help clients pursue redress. The day-to-day management of that mechanism was the responsibility of the directors. It is regrettable they did not contact your clients before the firm went into liquidation, but that is not the fault of the FCA.”

The clients claimed to the PI insurer in June 2012 and in November 2013 they were told the limit of indemnity had been reached and they would not receive compensation.

Mr X was told to approach the FSCS, which he did, but his claim was not made out due to a “close relative rule”.

The Complaints Commissioner says these situations are unfortunate but not the fault of the FCA.

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