The Financial Services Compensation Scheme has started legal proceedings against firms which recommended Keydata Lifemark products.
A letter sent on behalf of the FSCS by law firm Herbert Smith to 162 adviser firms says advisers failed to take reasonable steps to ensure Lifemark products were suitable for investors, failed to ensure investors understood the risks involved with Lifemark products or failed to ensure recommendations were clear, fair and not misleading.
The letter says: “Even without having conducted any of his own due diligence, any reasonably competent IFA would or should have known that the Lifemark products were high-risk investments or at any rate higher risk than was appropriate for the relevant investors.”
The FSCS is accusing the firms that recommended Lifemark products of negligence, claiming they breached their duty of care to their clients. It says the firms negligently made false statements about the risk profile and suitability of the products. It is also alleging breach of contract, claiming firms breached their contractual duty to investors to take reasonable skill and care in advising them to purchase Lifemark products. Firms are required to acknowledge receipt of the letter within 21 days and submit responses to the allegations within three months.
An FSCS spokesman says: “We believe that good claims exist against a large number of IFAs.”
In December, the FSCS had accepted 5,200 claims from Keydata SLS investors and paid out £67m. Money Marketing understands the FSCS is looking to pursue a much larger amount from advisers who sold Keydata Lifemark products.
Jacksons Financial Services managing director Pete Matthew says: “I cannot believe anyone who carried out adequate due diligence would have thought it acceptable to recommend Lifemark products.”