The Financial Services Compensation Scheme is seeking to make firms with claims against them of between £100,000 and £150,000 test cases in its legal battle with advisers over Keydata.
At a case management conference in London today, an order by FSCS lawyers Herbert Smith Freehills was approved which will mean firms with claims of between £100,000 and £150,000 will become potential 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.
At today’s hearing, the FSCS’ lawyers have successfully argued to widen this to advice firms with claims against them between £100,000 and £150,000.
The latest case management conference was designed to select 15 to 16 lead defendants to progress the case, but given the large number of firms which have settled, this was not possible.
Of the “primary list” of lead defendants previously selected by the FSCS, only six remain, four of which have objected to being lead defendants.
The judge ordered these six firms must proceed with disclosure proceedings while another list from firms with claims between £100,000 and £150,000 is drawn up.
This means they would have to provide evidence of all the advice they have ever given to the clients they advised to invest in Keydata.
Beale & Co, representing the four objecting firms, argued this would be too “onerous” and would put the firms at a disadvantage compared to those firms which are yet to “put their head above the parapet” and engage with the legal proceedings.
But the judge argued it was necessary to progress the case, saying: “If firms are sensibly organised and know their clients they should have files to identify all the advice given to them.”
The judge ruled that it would not be appropriate to select lead defendants until all potential defendants were known.
But he said: “I do not want to come back here in three months’ time and the suggestion be made that we now look at claims of between £50,000 and £100,000.”
The judge will assess the new pool of potential lead defendants at the beginning of October, ahead of another case management conference at the end of October.
The judge said: “I expect almost every firm is now going to object to being a lead defendant, and it is going to be a case of picking the most suitable firms from those objectors.”