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Keydata boss calls for pause in legal battle amid FCA disclosure row

Stewart-Ford-Keydata-500x320.jpg

The former chief executive of collapsed investment company Keydata has applied to the Upper Tribunal for more FCA documents relating to the case.

Stewart Ford is currently appealing a £75m fine from the regulator for his role in the company’s administration.

Keydata, which distributed life settlement bonds through IFAs, entered administration in 2009 after authorities deemed it had to pay back millions in tax because its products did not qualify for ISA status as the company thought.

The collapse resulted in an interim Financial Services Compensation Scheme levy of £326m three years later, while more than £100m of investors’ money was found to have been misappropriated.

In a letter to lawyers instructed by the FCA, and seen by Money Marketing, Ford claims the regulator failed to disclose information relevant to the appeal ahead of the Upper Tribunal hearing, and has not provided some further relevant material since the tribunal started under “secondary disclosure” rules.

In a case management hearing earlier this year, Judge Roger Berner denied five items of Ford’s original disclosure requests, but asked the FCA to provide secondary disclosure of “any further material, beyond that already disclosed in these proceedings, which might reasonably be expected to assist each applicant’s case”.

Ford says in the letter though some material has been disclosed, there is still material outstanding that he thinks should be disclosed.

The letter reads: “After several years of asking, only to be ignored time and time again by the FSA and your client, I see no point in repeating my request for full and proper disclosure. Instead, I will shortly be making an application to the Upper Tribunal for full disclosure to be made by your client in accordance with the tribunal rules.”

Ford has also asked the Commercial Court to delay a £650m claim he is bringing against the FCA for “misfeasance in public office” until the material has been disclosed.  The FCA applied to have the misfeasance claim struck out earlier this year.

In the letter Ford says: “Once your client has, at long last, complied with its secondary disclosure obligations in the Upper Tribunal, AAI [Consulting Limited, the company that has taken assignment of Ford’s estate rights under bankruptcy and of which Ford’s wife Anna is a director] will be in a position to instruct counsel to amend the particulars of claim in the present matter, based on the material disclosed. Until then, justice requires that the hearing of your client’s applications for strike-out and/or summary judgment and for security for costs to be adjourned.”

The letter adds: “Given your client’s long history of intransigence in relation to the disclosure process, I don’t expect it will consent to such an adjournment. I am therefore preparing an application to the Commercial Court for a stay of current proceedings until a date which is not less than 90 days after the FCA has fully and properly discharged its secondary disclosure obligations.”

It is understood that the FCA’s lawyers has not agreed to the adjournment.

Ford will also ask the Upper Tribunal for an order allowing him to use any disclosed material from the Upper Tribunal in the misfeasance claim.

The FCA declined to comment.

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Comments

There are 14 comments at the moment, we would love to hear your opinion too.

  1. If the FSA/FCA has nothing to hide, why is it holding back so much material relevant to Mr Ford’s defence of its claim against him?

  2. Because Julian the whole farrago was handled appallingly by the regulator in the first place.

  3. Are there no MPs out there who are prepared to kick up a stink about this?

  4. Close to the events, at the time 11th October 2016 at 9:19 pm

    Whilst it might further illuminate events if FSA offered up everything the fact is that this would not detract from what is a record breaking (single biggest FSCS bail out for an investment product/firm) debacle, with the catalogue of issues including: KIS identifying David Elias as an apparently credible business partner for the financial services / investment industry; KIS pedalling life settlement based investment products to all and sundry advisers, with most knowing next to nothing about the asset class, on the back of worse than lightweight marketing and supporting collateral materials and so called independent expert endorsements; KIS not handling developing the product properly, for ISA qualifying purposes; KIS covering up liquidity issues and income payment issues, hiding them from everybody, their own staff, independent advisers who were using the products, investors, the regulator; etc.

    The FCA has at least taken massive action following the events. For which it deserves credit. That is not to say that it shouldn’t ‘fess up about shortcomings in its approach in the period before the product reached the debacle stage that it ended up at.

    Of course interested parties and onlookers want that from them. But let’s not make the FCA/FSA out to be the perpetrator of the issues here, or the cause of them.

    The whole world learns as it goes, from governments dealing with global financial crisis, to central banks dealing with unite ended economic times, to regulators needing to tighten their act and learn from events too.

    The FCA, central banks and regulators are all more effective now, 8 years on from the financial crisis, 7 years in from KIS, etc. That is worth recognising.

  5. Will we ever know the truth?

  6. Who pays the legal fees when malfeasance in public office is claimed? You guessed, not the defendant staff at f-pack, but the levy paying cash cows… US

  7. I would just like the Truth now, nothing more and for Dr Debbie Harrison to make a public statement as well as M Cole.

  8. “Close to the events at the time” – here are a few points to consider:

    • David Elias was clearly a very clever [alleged] con-man. Amongst other things, he persuaded various highly reputable parties to vouch for him.
    • Life settlement investments involve the purchase [predominantly] of non-profit whole life policies – given a proper due diligence process, the purchase of the right policies at the right price, acquiring a sufficient spread of such assets and the maintenance of sufficient liquidity, this is a perfectly viable investment medium. It’s somewhat insulting to the adviser community to say that they knew “next to nothing about the asset class”.
    • Trustees/custodians were in place who should have safeguarded investors assets in the case of SLS Capital.
    • There was absolutely no need or justification for the FSA forcing Keydata into liquidation.
    • The liquidity crisis at Lifemark would appear to have been brought about mainly by the meddling/machinations of the FSA.

    Personally, I’m at a loss to see where exactly the FSA/FCA deserves any credit here.

  9. Phil Castle ~ Just another regulatory X File. The truth is out there but we’ll probably never get to know it.

    Paul Storrie ~ Probably several. The problem is that the FCA remains free to ignore them. The ONLY body that the FCA cannot brush off is the Treasury (and not its SC, which is just a talking shop for a bunch of earnest-looking men in suits). That said, even the Treasury-instigated FAMR is unlikely to accomplish anything of practical value, primarily because of its totally inadequate and woolly agenda. Various involved parties are making optimistically upbeat noises but, when all is said and nothing done, it’ll be just a re-run of the FCA’s discussions with APFA over restoration of the longstop.

  10. Paul

    So right. Close to the events – were you deaf and blind being that close?

  11. Close to the events, at the time 12th October 2016 at 9:59 pm

    @ Paul

    • David Elias was clearly a very clever [alleged] con-man. Amongst other things, he persuaded various highly reputable parties to vouch for him: Nonsense. Moderately robust DD should have raised enough red flags to discount him swiftly as a credible business partner. It is worth considering that the type of person who might think taking the level of fees out of the arrangement as were stripped out of the KIS investment propositions is tcf / moral / justifiable, may feel either less inclined towards performing such dd in the first place, or a preference and rather keen to ignore any red flags had any emerged.

    • Life settlement investments involve the purchase [predominantly] of non-profit whole life policies – given a proper due diligence process, the purchase of the right policies at the right price, acquiring a sufficient spread of such assets and the maintenance of sufficient liquidity, this is a perfectly viable investment medium. It’s somewhat insulting to the adviser community to say that they knew “next to nothing about the asset class”: Sure (perhaps?), but then again you are detailing pretty much the opposite of everything the KIS portfolio did and was? On your latter point, sorry, not meant to be offensive, but it’s somewhat accurate, on the whole, especially going back to that period, pre KIS blowing up. Which in fact takes us back to the former point and what you knew and thought of the KIS portfolios then against the legitimate points you make now …

    • Trustees/custodians were in place who should have safeguarded investors assets in the case of SLS Capital: Agreed – but they may also have stood a better chance of doing something timely if KIS had not concealed issues, etc. and dealt with such a ‘credible businessman’ in the first place.

    • There was absolutely no need or justification for the FSA forcing Keydata into liquidation: Nonsense. What is now widely known of what went on, long before the ISA bond listing issues, should have been / would have been enough to have had ‘them’ shot, not just forced into liquidation. The whole sorry saga is low grade and reprehensable.

    • The liquidity crisis at Lifemark would appear to have been brought about mainly by the meddling/machinations of the FSA: Utter BS. The liquidy issuers were manifest long before: the products were effectively ponzi-like, requiring new funds to maintain liquidity and income payments to previous investors. See above point for action that might have been appropriate had everything going on been known at the time.

    @Harry: very pleased to say ‘not that close’ – knowledge all post the events.

  12. @ Close to the events, at the time

    • David Elias was clearly a very clever [alleged] con-man. Amongst other things, he persuaded various highly reputable parties to vouch for him: Nonsense. Moderately robust DD should have raised enough red flags to discount him swiftly as a credible business partner. It is worth considering that the type of person who might think taking the level of fees out of the arrangement as were stripped out of the KIS investment propositions is tcf / moral / justifiable, may feel either less inclined towards performing such dd in the first place, or a preference and rather keen to ignore any red flags had any emerged.

    [Paul Storrie] It is now a matter of public record that Stewart Ford is suing Robert Rakison of Maguire Woods who acted for David Elias (Ford is also claiming that Rakison ‘repeatedly confirmed’ that the SLS Capital bonds would be listed on the Luxembourg Stock Exchange (in response to your previous comment about ISA eligibility)). It is generally accepted business practise to take assurances from professional third parties as to the bona fides of persons/businesses for whom they act.

    • Life settlement investments involve the purchase [predominantly] of non-profit whole life policies – given a proper due diligence process, the purchase of the right policies at the right price, acquiring a sufficient spread of such assets and the maintenance of sufficient liquidity, this is a perfectly viable investment medium. It’s somewhat insulting to the adviser community to say that they knew “next to nothing about the asset class”: Sure (perhaps?), but then again you are detailing pretty much the opposite of everything the KIS portfolio did and was? On your latter point, sorry, not meant to be offensive, but it’s somewhat accurate, on the whole, especially going back to that period, pre KIS blowing up. Which in fact takes us back to the former point and what you knew and thought of the KIS portfolios then against the legitimate points you make now …

    [Paul Storrie] There is a body of evidence to suggest that the Lifemark portfolio was performing adequately prior to the involvement of the FSA. Worthy of note is the issue of new Lifemark bonds that the CSSF had approved (their approval of such an issuance would be subject to their own DD being carried out on Lifemark) which the FSA allegedly then put the kybosh on.

    • Trustees/custodians were in place who should have safeguarded investors assets in the case of SLS Capital: Agreed – but they may also have stood a better chance of doing something timely if KIS had not concealed issues, etc. and dealt with such a ‘credible businessman’ in the first place.

    • There was absolutely no need or justification for the FSA forcing Keydata into liquidation: Nonsense. What is now widely known of what went on, long before the ISA bond listing issues, should have been / would have been enough to have had ‘them’ shot, not just forced into liquidation. The whole sorry saga is low grade and reprehensable.

    [Paul Storrie]If you are referring here to what the FSA claim “went on”, that is only the regulator’s opinion. Hopefully the court/tribunal cases being pursued by Stewart Ford will (if the FSA ever fess up the information) bring some clarity to the matter.

    • The liquidity crisis at Lifemark would appear to have been brought about mainly by the meddling/machinations of the FSA: Utter BS. The liquidy issuers were manifest long before: the products were effectively ponzi-like, requiring new funds to maintain liquidity and income payments to previous investors. See above point for action that might have been appropriate had everything going on been known at the time.

    [Paul Storrie] The operation of a large life settlement fund is a complex process and chucking the word “Ponzi” into these types of discussion is, IMO, unhelpful. Part of the normal operation of such vehicles is to have available lines of credit (in various forms) and to attract new subscriptions by way of further bond issues.

  13. Please can anyone help we took out a bond with keydata which should have matured May 2014.Our bank in Spain has the bond and wil not release it without someone telling them it’s gone bankrupt and they make charges of 500€ per year and say we cannot close our bank account with them .Hope someone can help
    Yours gratefully Martin O’Malley

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