The Financial Services Compensation Scheme has recovered £100m in Keydata compensation and will rebate £50m of that to fund managers.
In a blog posted on the FSCS website, chief executive Mark Neale says fund managers will receive a cheque for £50m this month.
And he says financial intermediaries have also benefitted from the recoveries work this year and last year with £30m being used “to offset the costs of compensation and the costs of recoveries”.
The FSCS has been locked in a legal battle with advisers over Keydata, which is set to proceed to trial following the selection of new lead case defendants in October. Advisers have been offered settlement discounts of as much as 90 per cent.
Neale says the FSCS has already recovered “several times more” than the costs it has incurred through the legal action.
He says the FSCS will publish a “full account” in the new year of how much it has recovered from Keydata and how much it has spent to achieve those recoveries.
Last year, the FSCS said it expected to recover £75m in Keydata compensation. In January, Money Marketing reported it was facing legal costs of £30m in its battle with advisers.
Neale says: “It’s not every day you get a cheque for £50m from FSCS. But this is what will happen for fund managers in December.
“And financial intermediaries also had the benefit of our recoveries work this year and last year with some £30m being used to offset the costs of compensation and the costs of recoveries.
“How come? Well, because these returns of funds by FSCS represent one part of the significant recoveries we’ve achieved following the 2010 failure of Keydata.”
An FSCS spokeswoman confirms fund managers will receive a cheque based on the proportion of the levy they paid in 2010/11. In January 2011, the FSCS raised an interim levy of £233m from fund managers and £93m from investment intermediaries relating to the failure of Keydata.
Neale adds: “This action continues; it will continue while there remains value to recover. But it has already made a major contribution to recoveries we have achieved. FSCS has reached fair settlements with many of the businesses against whom we took action.
“The industry is significantly better off as a result of FSCS’s action to recover value and is already seeing substantial returns.”
The FSCS levy for investment advisers for 2014/15 has been set at £112m, up from an estimated £105m. The levy for investment advisers in 2013/14 was £78m.
Advisers have to meet the costs of FSCS claims up to £150m in one financial year.