The Financial Services Compensation Scheme is seeking new lead case defendants in its legal challenge to recoup Keydata compensation, Money Marketing understands.
Last year the FSCS selected six lead case defendants as part of its bid to recoup up to £75m out of around £400m paid out in Keydata compensation.
Lead defendant Investacc formally received notice the case against it had been closed last month.
Money Marketing understands other lead defendants have also settled with the FSCS, though not Chase de Vere. The FSCS is now writing to other firms about becoming lead defendants.
The High Court requires lead cases to have a sufficient number of clients who were recommended both SLS and Lifemark Keydata products.
DWF Fishburns partner Harriet Quiney says: “The Keydata litigation is very complex, involving 25 subtly different financial products sold over a four-year period by over a thousand advisers to tens of thousands of customers.
“Selecting appropriate lead defendants is difficult as the parties must ensure that all relevant allegations are covered by a sufficient number and variety of sales.
“If the claims against the larger firms settle, there may be few or no firms with an appropriate spread of cases to become lead defendants. Without access to professional indemnity insurance the cost of being a lead defendant could tip firms into default.”
One lawyer involved in the case told Money Marketing: “We are now back to square one and there is going to be a bun fight over which firms become lead defendants.
“A lot of the advisers left in the litigation are high street firms with no insurance cover – the idea they should be a lead defendant is absurd.”
A spokesman for the FSCS says settlement details are confidential and it will continue to pursue recoveries.
Investacc declined to comment.
Financial Escape director Phil Castle says: “It is important this case gets to court, but that appears to be becoming increasingly unlikely.”