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Law firm tells Keydata clients to claim from their adviser

Regulatory Legal has defended a briefing note sent to a number of Keydata Lifemark investors advising them to claim against their adviser before attempting to claim from the Financial Services Compensation Scheme.

The note says: “It would be prudent to advance an argument against your financial adviser first, viewing the FSCS as a backstop once greater clarity is provided by the FSCS with regards to what you can and cannot claim for.”

Regulatory Legal partner Michael Cotter says: “We have been asked to provide analysis of the position for clients. Our advice is that until the FSCS position is clear in terms of eligibility and redress amount, investors should hold fire.”

Regulatory Legal is leading a judicial review against the FSCS’s adviser Keydata levy. Partner Gareth Fatchett says: “As a solicitors practice, we are duty bound to offer advice that is in the interests of clients.”


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There are 8 comments at the moment, we would love to hear your opinion too.

  1. Advice to clients such as:

    “The FOS is a free service”?

    Haven’t seen that anywhere Gareth, not duty bound to say that then?

  2. Quite right. The FSCS is the last resort and my money should not be used to pay for claims until those who sold these products have been given an opportunity to explain themselves.

    If, of course, any claim against an adviser fails then I don’t see the FSCS being required to pay anything.

  3. I understand that this is standard practice. The FSCS will not consider a claim until a rejection letter from the IFA giving the advice has been issued.

    Regulatory Legal are to my knowledge simply advising clients in the correct manner as much as this might upset some IFAs.

    The problem comes when you reject the claims and the FSCS pay out and your client is not satisified with the outcome. They then can end up going through FOS.

  4. To John and Bob. It is unusual for me to disagree with either of you just as the FSCS claim forms themselves are unusual in that they are bespoke to this particualr issue.
    If you have not seen one, then it could be woirthwhile you obtain one before you comment further.
    The form appears not to be for immediate compensation (as this will not be clear for either the FSCS or for the advisery firm) and requires teh consuemr to identify who they think the main culprit is (which could be Keydata) or the advisery firm. Even if the consuemr thinks Keydata are the ones at fault, the FSCS ask the consumer to enclose the suitability report and comment on what they relied on from the adviser. So I suspect the FSCS may be looking to resolve the issue quickly by sifting cases and immediately sending some back to the IFA to defend in clear cut cases (i.e. 100% allocation to Keydata for example) and using some other sifting criteria so that tehy can confirm the consumer will be compensated earlier, just it neds to be established whether a case against the adviser makes sense while looking carefully to see if there are faults in the advice/suitability. The forms allow the FSCS to stand in the consumers shoes and pursue a complaint on their behalf.

    I know some advisers feel the advice was flawed whatever the sum invested was, but if the % of the portfolio was say only 3%, it appears sensible not to jump to conclusion and let due process occur.

    Coming back to what John said about if a claim against the adviser fails you don’t see that a claim against the FSCS would stand up, that would be like saying that if AVIVA had made a promise in a KFD it could not keep, that neither the IFA, nor AVIVA would have any liability for that promise/guarantee that wasn’t kept. I am sure you would expect AVIVA to pay up for their mistake, not you and that if you spotted it before the client, you’d probably help them recover their money, so whilst we are all annoyed to find the FSCS treating Keydata as in the intermediary section of the FSCS levy, it is just as important that a precedent is not set for being held responsible for otehr people’s mistakes or misrepresentation (i.e. a massive insurer like AVIVA)
    If advisers who sold the plans are found at fault by the FOS, they’ll end up paying one way or anotehr either cash (due to PI excesses) or by not having sufficient capital adequacy which will mean a rapid and unwanted exit from the industry before 2013 with possible other consequences.

  5. All,

    When I reviewed the advice note I could see why advising firms would be uncomfortable.

    You have nothing to be worried about if risks were explained and the % of portfolio is less than 20% of total assets.

    FOS is awarding against firms with 20% or more of assets.

    The counter consideration is that those paying the FSCS levy (who are the majority) do not want to pick up the costs of advice they have not given.

    As a final thought, we always confirm to clients that they can go to FOS, FSCS and FSA themselves without costs. The reality is people want help as the “consumer friendly” nature of the scheme is anything but that due to insurers and their lawyers acting for defendants.

  6. The failue of Key Data seems to be based on issues concerning that company’s incompetence.

    Unless there was a gross failing in the advice process, targeting the firms who recommended these products based on the information provided by Key Data is iniquitous.

    A decision to award against a firm based on an arbritary 20% would also be asinine.

  7. Remember folks, this is the firm that purports to be your champion and crusades on your behalf , whilst asking you to stump up to keep their turnover buoyant – not to mention any potential profit – either from tilting at windmills or from the additional free publicity.

    I wonder of any of the contributors now feel a bit of a mug?

  8. Harry, I don’t feel a mug.

    I steered away from this Keydata stuff (and Arch Cru) and now my levy is going to bail out the Norwich & Peterbrough’s and AWD’s of this world. I find it slightly sick that small IFA’s are asked to bail out big financial institutions that are either (a) not IFA’s but product providers or (b) big advisory firms and institutions whose research is not up to snuff and who can’t spot these investments for what they are.

    It strikes me as fair (the word/concept of the monent I suppose) that the FSCS categorise product providers correctly and that these larger advisers who have sold a lot of this product stand behind their advice rather than expect me (and you) to bail them out. It is a very unappealing spectacle to see these large firms turning their back on their advice and hoping for a bail out. If the fault lies at the advisory level then that is where it should be dealt with.

    The FSCS is not a fund to protect product floggers who get caught out when one of these schemes fails but, as I understand it, a fallback for clients, who lose out through no fault of their own and have no recourse to either adviser or provider.

    Gareth is welcome to £235 from me.

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