Former Keydata founder Stewart Ford has accused the FCA and Financial Services Compensation Scheme of having a conflict of interest when they sued IFAs for compensation after the investment company’s collapse.
In 2012, three years after Keydata entered administration, the FSCS launched legal proceedings against 820 IFAs that recommended Keydata-distributed life settlement products.
The FSCS looked to claw back some of the roughly £330m it had to pay out in compensation over Keydata from IFAs who it said failed to take reasonable steps to ensure Keydata-distributed products were suitable for investors, failed to ensure investors understood the risks involved or failed to ensure recommendations were clear, fair and not misleading.
Ford is currently appealing a £75m fine from the regulator for his role in the company’s collapse.
In a case management hearing today, Ford claimed that he had proposed a £150m rescue package to the bodies, but this had been rejected.
Ford said: “At the beginning there was some collaboration between them before they took the company down about what they were going to do.”
“When the £150m rescue plan came online, the FCA and FSCS were pursuing IFAs for compensation for mis-selling, they were entirely conflicted as to whether or not a rescue plan should take place or not. They were pursuing people for compensation at the same time I was pitching to the organisation there was a rescue plan and how now no consumer detriment has to happen.”
“When we are trying to show people and they may want them, what do they do when you solve it?”
Ford claims that further disclosure would show “communication between the two that under no circumstances let this happen.”
The FSCS eventually recovered £52.4m from IFA legal action, settling early with many firms for reduced sums. It finally ended legal proceedings against IFAs in January this year.
Acting for the FCA, Blackstone Chambers’ Andrew George QC said that the FCA was not willing to accept any rescue plan where Ford remained a director or manager at the firm, and that the consumer detriment for which he was fined would have already taken place.
George said: “Our position is this can’t be relevant. By the time Keydata needs rescuing, the reason it needs rescuing…the consumer detriment argument either is or is not borne out.”
“It can’t make a difference if a white knight will have come along.”