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FSCS offers advisers 90% discounts in Keydata legal battle

The Financial Services Compensation Scheme is offering firms settlement discounts of up to 90 per cent in its legal battle with advisers over Keydata.

In a letter to firms, seen by Money Marketing, FSCS lawyers Herbert Smith Freehills has offered firms with claims of less than £100,000 a settlement discount of 90 per cent.

It is understood HSF has also written to firms with claims of less than £50,000 offering a discount of 80 per cent.

The letter says: “In order to consolidate the group of remaining defendants in the proceedings at this juncture, and for commercial and pragmatic reasons, the FSCS is prepared to accept 10 per cent of the total value of the claims from the defendant.”

The offer is open until 12 September.

The FSCS is continuing the process of selecting new lead case defendants, after widening the criteria at a case management conference in July.

At the conference, an order was approved which meant firms claims of between £100,000 and £150,000 could be selected as lead cases. There are 32 firms which fall into that category.

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 at a case management conference in May, HSF 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.

The court is expected to select 15 or 16 lead defendants in early October.

A source close to the case says: “The FSCS is trying to pick up settlements wherever it can, either with a view to focusing on the lead defendants or packing up the whole case.

“There remains a number of firms which feel so strongly about the case that they are not prepared to settle, even at these low levels.”

An FSCS spokeswoman says: “The FSCS is committed to pursuing recoveries where it is reasonably possible and cost effective to do so.”

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Comments

There are 7 comments at the moment, we would love to hear your opinion too.

  1. This just goes to show that the behaviour of the FSCS was based on a poor legal foundation. If they had both the legal and moral strength of argument then they would not be offering such huge discounts. It seems like an exit strategy from someone trying to end an embarrassment.
    No doubt the people in charge will be promoted for failing. Advisers and insurers should be told at the end how much the action has cost and how much it has recovered, time for a freedom of information request I think.

  2. So they will chase the guilty as long as they have a chance of getting the money back and then when that runs dry the easily and simply slap the rest of us with a levy. Thats very good of them. I would like to know why as they will have to collect the other 90% from the those of his who had nothing to do with this shambles. Exactly what planet are they on?

  3. What a surprise! Why has it taken them so long – about 7 years + ?

    They have now to pay HSF zonking great fees. One wonders about the cost effectiveness of it all. They could have done this more than 5 years ago and saved a fortune. Just don’t let me read that anyone from any regulator has joined HSF, or that anyone from HSF has joined a regulator.

    Is this one of the greatest balls up since the Dardanelles?

  4. Did the PII policies of the firms concerned cover them for advising on investments of this nature? If so, why aren’t their insurers paying up? If not, then I really don’t see why they should get a discount to just 10%, with the other 90% being dumped on the rest of us.

  5. @ Harry Katz (…and who knows how many others?)

    Please don’t use this link:

    http://www.thelawyer.com/news/events-and-awards/the-lawyer-awards-2014-in-house-public-sector-team-of-the-year/3021417.article

    You do NOT want to know who won an award, NOR who sponsored the award.

    No, you don’t, you really don’t!!!!

  6. Arghhhhhhhhh!!!
    Pass the hemlock!! I really really, really don’t believe that what is supposed to be a respectable (ha ha) firm can be so crass as to practically admit that it is bribing its clients.

    Why oh why hasn’t this received broader attention. Does the FSA know? Does Parliament Know? Does the Law Society know?

    Surely to goodness there should be some sort of sanction.

    Remember when HSF (is the F for Freeloader or Freehill?) first began the Key Data case they were in serious breach of the Data Protection Act – and what happened – just a slap on the wrist. It would seem that the biggest law firms are indeed a law unto themselves.

  7. correlationstreet 6th September 2014 at 8:58 am

    Wow, I didn’t know that Joanna Lumley worked at the FSCS – I want to work there too please.

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