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FSCS Keydata legal battle set to proceed to trial

The Financial Services Compensation Scheme’s legal battle with advisers over Keydata is set to proceed towards trial.

Following the selection of 15 new lead case defendants last month, at a case management conference today the court ordered that the lead defendants’ legal costs must be shared between all firms party to the proceedings.

There are 63 active defendants remaining, who must share the costs between them. In addition, there are around 20 firms which have not acknowledged the court proceedings and which have now been served a notice by the FSCS to pay their claim in full.

A further case management conference in March will set out the timetable of proceedings to trial. Lawyers close to the case say the trial could go ahead in a year’s time.

Beale and Company partner Damian McPhun says: “There are very good prospects that the case will proceed to trial with a significant number of lead defendants.

“There now remains a core of defendants who are determined to see the matter to trial and to demonstrate the suitability of their advice. They regard the FSCS action as little more than institutional bullying and believe that a positive result at trial will undermine the legitimacy of the whole FSCS recovery action.”

National law firm DWF partner Harriet Quiney says: “The lead defendants have had every opportunity to settle so I suspect they are happy to be lead defendants, and there will be a trial.

“Other firms may still settle though, particularly now they are facing a share of the legal costs.

“This will be a complicated and expensive trial, and a big risk for the FSCS. If it wins it may still struggle to recover the costs from firms.”

An FSCS spokeswoman says: “We can confirm there are 63 defendant firms and today a shared cost order has been granted relating to all of them. Of the 63, 15 will be used as lead cases. No date has been set for trial.”

The long-running saga between the FSCS and Keydata advisers originally required lead defendants to have insurance and legal representation. Firms also had to meet a set of technical requirements based on the claims against them, including having a certain number of both Lifemark and SLS-backed product sales.

But following a large number of settlements, in May the FSCS’s lawyers invited the court to make the following orders: that each defendant with claims worth over £150,000 be a potential lead defendant, and to remove the requirement that lead defendants have insurance and legal representation.

In July, the criteria was further widened to those with claims of between £100,000 and £150,000 against them.


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There are 4 comments at the moment, we would love to hear your opinion too.

  1. “They regard the FSCS action as little more than institutional bullying”

    That is exactly what it is. There are those of us who have settled. But in settling we were well aware that however righteous we considered our case and notwithstanding legal and compliance consultant opinion as to the robustness of our case we smaller defendants knew full well that legal costs could well exceed the FSCS claim. Costs may have been granted, but in law there is no certainty and you need deep pockets to take the risk – however slight you are told it may be.

    We therefore made the offer and stumped up – glad of whatever discount we could grab.

    If the defendants in the case are successful how does that leave those who have forked out? Rueful I would have thought as any idea of receiving any kind of a rebate is a likely as having Santa Clause as your next client. And so once again British ‘civil justice’ demonstrates once again what we all know – those with the fattest wallets get the best results.

  2. Couldn’t agree more. I hope the remaining IFAs fight this and the FSCS loses this case, which I think it will. It won’t get me my money back, but there will be some satisfaction seeing the egg on the FSCS’s face and hopefully it will spare us having this sort of debacle again.

  3. Against the posibbility of large legal fees and having to settle in the end anyway we reached a deal with FSCS and settled. If I had the same deep pockets I too would have my day in court but I simply could not take the risk.Where do the FSCS get the funds for these actions? From advisory firms and levies they raise. So in the end does it actually matter who wins as we will end up paying.

  4. E L Wisty (an only twin) 10th November 2014 at 10:18 am

    Regardless of the outcome of the court case, FSCS were ill-advised to bring this action and should be held to account. If that scrutiny brings about a change in this flawed system, then all the better.

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