Fund managers who have helped pay compensation over the collapse of life settlement bond provider Keydata will receive a £12m refund, the Financial Services Compensation Scheme has announced.
Keydata’s management has been embroiled in a multi-million-pound legal battle with the FCA since it collapsed in 2009. The total bill for compensation stands at more than £330m to date, with the regulator accusing Keydata founder Stewart Ford accused of negligence and making misleading statements over risk warnings.
Ford claims he is the victim of fraud perpetrated by individuals at companies that backed the products.
The FSCS took legal action against a number of financial advisers who recommended Keydata products. It has now made £100m in recoveries, of which it has used £38.5m to offset bills for the rest of the investment intermediation funding class.
A refund is also now due to fund managers because they helped offset compensation bills falling on investment advisers when they breached their annual limit in 2011/11, primarily due to Keydata claims.
FSCS chief executive Mark Neale says: “We came to the aid of thousands of Keydata customers while paying out hundreds of millions of pounds. The costs of providing this protection fell to investment intermediaries and to fund managers. We’re pleased to issue fund managers with an £11.7m refund this week. This is clear proof of our success in pursuing recoveries for the benefit of the firms that fund us, to which we remain fully committed.”
At the time Keydata closed, it had around 140 staff and had £2.8bn in assets under management. It marketed bonds backed by life settlement products through advisers.
It incurred tax liabilities due to the mis-labelling of its products as Isas, but claims that it would have survived and continued to pay investors had then regulator the FSA not taken the proactive decision to place it into liquidation.