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Keydata was under fund firm regulator

Keydata was regulated by the Investment Management Regulatory Organisation before the FSA was set up, adding further weight to calls for fund managers to share the burden of the £43m Keydata levy.

Last week, the Financial Services Compensation Scheme clarified that no final decision had yet been taken to issue the interim levy on the investment intermediation sub-class, although it hopes to do this by mid-March.

Aifa estimates that adviser firms will pay around £440 per adviser, with some firms paying several thousand pounds for the total £70m levy which also covers two stockbroker firms.

But it has emerged that Keydata was regulated by Imro before the FSA was established and contributed levies into the Investors Compensation Scheme alongside fund companies.

The FSCS argues that Keydata was not responsible for investment management, as this was outsourced to the investment vehicles SLS Capital and Lifemark, and so the £43m levy should fall on intermediaries rather than fund managers.

Industry consultant Mike Fenwick says: “For all of those secondary events there had to be an initial event and that was the decisions taken byKeydata over how investments once received were to be managed, and that is investment management. End of story as far as I am concerned.”

Aifa is continuing to lobby for a fairer settlement. Advisers will have to pay the interim levy within 30 days of notification although they can pay in instalments over a year through Premium Credit at an interest rate of 7.5-9 per cent, depending on trade body membership.

An FSCS spokeswoman says: “The way that past levies were allocated almost 10 years ago by the Investors’ Compensation Scheme has no bearing on the current allocation and position. The FSCS has to assess to which funding class it should properly allocate the costs of compensation according to the rules now set for it by the FSA.”

Ruth Whitehead Asssociates principal Ruth Whitehead says: “This certainly adds credence to the argument that the fund management sub-class should share some of the burden. We will shoulder our share but I do think IFAs are being dumped on while others get away with it.”


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Well, the cricket season is here, and England and Australia are stepping up to the wicket. Although we compete with each other in the sporting world, when it comes to pensions, Australia’s pension programme is held up as a model for our auto-enrolment initiative. Auto-enrolment was introduced because people weren’t saving enough into their pensions, and it is still early days but signs are positive. However, in Australia, saving into a pension is compulsory, and in fact employers are the ones who have to pay in. Employees in Australia can make additional contributions into their pensions, but they don’t have to. Should the onus be on the employer or employee to save? Well in the UK we think it’s both, but to get ‘adequate’ savings for retirement it’s the employee who has to pay more in.


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There are 11 comments at the moment, we would love to hear your opinion too.

  1. The unseemly game of pass the parcel displays a callousness on the part of the whole sector.

    Has nobody any sympathy for the beleagured investors most of whom have lost their life savings in their senior years? From the FSA down to the likes of Ms Whitehaed every organisation is seeking to protect its own position at the expense of innocent investors. You should all be thoroughly ashamed and not indulging in mindless if expensive games

  2. Les, did you not know….its ALWAYS the client who gets stiffed by the investment industry!

  3. So it would appear that any IFA can set up an investment product and outsource the investment management and that meets FSA approval.

    I don’t believe it.

  4. Les Morrell has a point, presumably because he fell for the scam. Those of us who did not gain no brownie points, only a large bill which we have to pass on to our clients in increased fees.
    If the opacity is such in any investment vehicle that you really cannot see and understand the underlying product, and thereby grade the risk, then don’t touch it. Keydata was just one of many; there will be more because they are easy to sell to the gullible as ‘secure’. B……s!

  5. For the record …

    In the Report which I am known to have submitted to the FSCS and which has also gone to the FSA, I included the very point made by Les Morrell – are those who invested in Keydata being treated fairly? I concluded they were not.

    May I also add that the Report adopted two differing perspectives. My own view, as quoted above, remains that Keydata should be seen as an “investment management” issue.

    But that is just my opinion, and the FSCS and the FSA are entitled to reach an alternative conclusion – but it is one they have to defend in terms of its much wider implications.

    It appears (and without allowing full access to their legal opinion, one can only say “it appears”) that the FSCS have established a “DNA profile” of what constitutes “investment intermediation”.

    It challenges the FSA’s categorisations, by ignoring “authorisations and permissions” and seeks to pinpoint “activities”

    But they then fail in considering how to apportion any levy by failing to apply that “DNA Profile” to a much wider class of their definition of “investment intermediaries” – it is by their very definition much wider than just IFAs.

    That being the case, the levy should include “all those” who match the “DNA Profile” – in that it fails to do so, the FSCS either negate their own analysis, and/or fail to realise the wider implications for the future.

    Not least that they create a gross mismatch between what the FSA may authorise, and what the FSCS may conclude was not authorised.

    Whether I am right in my view, or the FSCS are right in their current view (we do not know their final position) they have opened up questions that demand answers.

    And yes, Les Morrell – answers that are needed by the industry, but by the eventual customers more than anyone else.

  6. Les & Dathan, the investors will enjoy redress courtesy of the fSCS – that has already been established.

    What the arguments centre on is the continual struggle for proportionality and fairness from the regulator and its subsidiary partners.


    Ruth Whitehead just about sums this up: “I do think IFAs are being dumped on while others get away with it.”

    IFA’s are seen as cannon fodder ready to go over the top when the generals blow their whistle!

    To use another WW1 expression: “Lions led by donkeys”.

    Now that we are told to charge fees by the donkeys I wonder if they will have a problem when we factor in to our true fee charges, the actual cost of uncertainty – of dealing with a regulator who regulates and charges fees after the event.

    Market forces dictate that costs are passed on and when I hear the chattering classes lamenting over high commissions I wonder if they have any comprehension of the huge fees we would in reality need to charge just to cover the contingency of this regulatory mismanagement? Far higher than the highest commission I suspect!

  8. We were aware back in July 2009 that Keydata had been authorised and regulated by IMRO prior to coming under the FSA. This is not news.

    What matters going forward is a clear ruling on whether the FSA were right to allow authorisation under subset D2. All the correspondence we have had indicates that the FSA are desperately trying to use semantics to justify such a regulatory categorisation.

    The FSA is hiding behind the FSCS as if it were a seperate, distinct body. It is not. Everything the FSCS does, apart from pay out awards, is done under direct instruction from Canary Wharf.

    Until we are allowed sight of the legal opinion which was used to apportion the levy under dispute we will be no nearer the truth of the matter.

    Be under no illusion, this is one of the most important regulatory battles that IFAs have ever fought. It must not be lost for want of a nail.

  9. Having read all I can find about Les Morrell’s case I would like to know more about his plight and see if I can help.

    Do a Google for me Les.

  10. Don’t pay, if we all disputed the issue and the legality of the situation would not a different situation arise very quickly? I am also uncertain what a European verdict would bring.

  11. Crack open the Champagne and check out The Mail.

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