View more on these topics

FSCS offers early settlement discount to Keydata IFAs

The Financial Services Compensation Scheme has offered Keydata distributors with claims against them of less than £50,000 a 50 per cent early settlement discount.

Law firm Herbert Smith, acting on behalf of the FSCS, has written to firms with the offer, which gives them 21 days to accept the settlement from the date they were written to.

In the letter, seen by Money Marketing, Herbert Smith notes the FSCS has brought proceedings against over 400 advisers to recoup some of the compensation paid to Keydata investors. The law firm says there is a “huge disparity” in the amounts being claimed against each adviser firm.

Herbert Smith says: “Our client has therefore decided to take a pragmatic, commercial approach at this early stage of the proceedings, before substantial costs are incurred on both sides, and to make an offer across the board to all defendants against whom the principal amount is less than £50,000.”

An FSCS spokeswoman says: “The FSCS must pursue recoveries wherever reasonably possible and cost effective to do so.  We are pursuing recoveries from firms in connection with the Keydata products and are confident that a court will find in our favour if the matter proceeds to trial.  

“However, the FSCS also recognises that the parties to this litigation are likely to incur substantial costs if these claims are pursued to trial.  As a result, we have proposed a settlement offer to those firms against whom we have lower value claims as a result of the compensation we have paid to consumers arising from the Keydata failure.  

“The offer is being made now at an early stage in the litigation, for a limited period of time, for pragmatic, commercial and case management reasons, and does not reflect or undermine FSCS’s views on the merit of this category of claims.”

Law firm Regulatory Legal director Dexter Perrott says: “If you have got over 400 firms all facing a claim, and a large number of claims are less than £50,000, for them all to get lumbered with a huge amount of legal costs would be disproportionate, and the courts would look askance at that.

“For the remaining firms it means the FSCS has a duty to recover some funds cost-effectively. This weeds out the firms with the lower liability.”

He adds that if more firms had ended up in court defending the claims, they could mount a defence in arguing that advisers could not have known that £100m would be “misappropriated” from the Luxemburg-based SLS vehicle that backed Keydata products.


News and expert analysis straight to your inbox

Sign up


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

  1. So why don’t they band together and mount the defence????????

    I’m sure the gamekeeper turned poacher sorry poacher turned gamekeeper (never have worked out which way around it is), Regulatory Legal would be happy to take the defense on.

  2. Despite the bravado, they’re (FSCS) clearly not confident of their position & are looking to dress this up as a ‘kind gesture’ to the poor souls that are on the wrong end of a rotten situation. I’m not buying it. Bring on the court cases I say – let’s expose this sham for what it is – REGULATORY INCOMPETENCE!

  3. The FSCS are obviously trying to weaken any co-operative defendants, whatever happens they will still be stained by the knowledge they withheld information that would substantially altered the decision making process of the IFAs to recommend this product, and if the IFAs are kept in the dark they cannot enlighten the investors and I speak as a risk averse Keydata ‘victim’.

  4. Bring on the court case. There are many compliant files. It is up to Herbie & his clients to prove negligence. Simply to say “we are confident a court will find in our favour” is scaremongering bully boy tactics.
    The biggest act of negligence is the FSA not sharing it’s concerns over Keydata, after it’s well documented arrow visit.
    If there are over 500 negligent Firms/Advisers the FSA is even more incompetent than they appear.
    How can due diligenceprevent a £100M misappropriation.

  5. I hope that nobody falls for this. I, for one, will not be bullied, and will not pay anything until somebody proves that I was negligent.

  6. Lets hope that all IFA’s stand together and not pay, let the FSCS take this to court and have the can of worms opened.
    I advised Keydata based on all the information at my disposal if the FSA had made any hint of a warning I wouldn’t have sold them, so who do I blame, the FSA as they were worried and choose not to make this information available to all. Now who’s in the wrong, !!!!!! let the court decide I quite fancy my chances.

  7. It’s time for the banners and the signs. If the old git pensioners can make a fuss when they’re stuffed by government so can we. Now what should the signs say?…

    Bollocks to Blair!

    No, he’s already sodded off with the family silver.

    How about,

    You lazy lot at Canary Wharf, why don’t you pay back your bonuses?

    Mmmm…. Doesn’t scan very well but it’s on the right track.

Leave a comment


Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm