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Keydata’s Stewart Ford to sue FCA over ‘abuse of power’

Keydata founder Stewart Ford is bringing a £371m legal claim for loss and damages against the FCA which alleges the regulator’s investigation into Keydata was an “abuse of power”.

In a letter before action sent to the FCA last week, seen by Money Marketing, Ford claims the wrongful actions of the FSA during its Keydata investigation caused “grievous and irreparable harm” to his reputation as well as direct financial loss resulting from the closure of Keydata.

The claim is against the investigation team at the time and the FCA, as Ford says the regulator is liable for the actions of its statutory predecessor.

He says the nature and basis of the claims also override the statutory immunity available to the regulator under the Financial Services and Markets Act.

Ford is pursuing a claim of ‘misfeasance in public office’, claiming the FSA had an ulterior motive for its investigations into Keydata and his conduct.

He says: “The purpose was to demonstrate the effectiveness of the FSA as a ‘robust’ regulator in the wake of the financial crisis of 2008 and thus restore public confidence in the FSA.

“The FSA’s actions, as carried out by the investigation team, were politically motivated and the outcome of the investigation was pre-determined. No consideration was given to the consequences of the decision to force the closure of Keydata or the intervention into Lifemark. This amounted to nothing less than an abuse of power.”

Keydata’s administration in June 2009 prompted a £326m Financial Services Compensation Scheme interim industry levy in 2011.

Ford claims Keydata was a successful and profitable company until it was “ambushed” by the regulator in 2009. He says Keydata was at the time in the final stages of agreeing a way forward with HMRC relating to protecting the Isa status of Keydata investors.

Ford says: “The FCA has acted illegally in its dealings with me and it is not above the law. The regulator has ruined my life and I fully intend to stand up to those responsible.”

Ford has calculated the £371m figure based on loss and damage relating to: the closure of Keydata, which he says was worth in excess of £100m in June 2009; the closure of Lifemark, of which he was a shareholder; the loss of future income streams in the form of distribution fees paid by Lifemark to entities owned by trusts set up by Ford for his family; the loss of future broker commissions earned by entities owned by the trusts in respect of the acquisition of life settlement policies for Lifemark; and reputational damage.  

The FCA restarted its disciplinary proceedings against Ford in July 2013 after he lost his bid to have previous FSA investigators taken off the case.

Last week the FCA’s regulatory decisions committee heard oral evidence from Ford in the case.

An FCA spokesman says: “The FCA’s disciplinary proceedings against Mr Ford continue and under these circumstances it is inappropriate to comment.”


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There are 24 comments at the moment, we would love to hear your opinion too.

  1. I predict a riot

  2. Either way the advisers get to pick up the bill While he has ever rightt to fight for his reputation and integrity which I am sure none of us would deny Mr Ford that
    But it would be a nice gesture to see any claim help to be laced in the FSCS pot or help those that invested in the products

  3. Good…who knows the rights and wrongs of this case but a genuine legal spotlight is what is needed here rather than the ‘make it up as you go along to save face’ rules of the regulator. It’s time a court looked in depth at the way in which regulators operate in financial services because they are frequently unfair and it appears that many of their decisions have had significant consumer detriment.

    Regulators are like having an expensive NHS that kills more people than it cures.

    Of course, if his case is proved – it will bring down the entire regulatory system in the UK and many many heads will roll. We should not underestimate what is happening here.

  4. This will be so bitter-sweet, whatever the outcome !

    I would love to see Mr Ford wipe the floor with them (if they have acted irresponsibly) then on the other hand we know the first thing the FCA will say !

    Personally I know the feeling of being “ambushed” by the regulator just like Mr Ford

    But this is what comes Mr Wheatley; of “shooting first” and asking questions later, and Hector “be afraid” Sants. You (the FCA/FSA) are starting to collect quite a back log of (expensive) mistakes !! about time you started to pay for them not us ?

  5. I thought the Regulator was ‘fireproof’ and un-sueable.

    Even then I would bet against Mr Ford.

    However what I did find interesting in the week end reports is that in every article Key Data was referred to as a PROVIDER. In which case one wonders yet again how the regulator classified them as an intermediary with the result that we had to pick up the tab.

    Furthermore if the debacle was all the fault of Key Data (the provider) why are intermediaries being chased even now by a hugely expensive legal machine?

  6. FSA & now the FCA are a shambles but if they lose this case, it will be ourselves that pick up the bill!

  7. Either way us advisers are in trouble.

    Ford wins – Regulator looks stupid which makes financial services look stupid.

    Regulator wins – We have no hope of ever holding them to account.

    It will be interesting but i can’t ever see the regulator having to defend itself in court.

  8. Ex Broker Consultant 4th August 2014 at 10:31 am

    I predict an out of court settlement

  9. Politically motivated and the outcome of the investigation was pre-determined? I can well believe this to be the case.

    We know the FCA and the FSA before it is not accountable to Treasury Ministers or to Parliament, as confirmed by Hector Sants at a Treasury Select Committee meeting on 9 March 2011. We have a regulatory dictatorship unrestricted by law, constitutions, or other social and political factors within the state. It exists because it suits whatever government to allow regulation by dictatorship outside of the parliamentary process.

    The FSA/FCA is an unelected, unaccountable body of the executive and the executive is the part of government that “should” constitutionally be separate.

    If the government and executive are one and the same you risk abuse where the different powers of government are assumed by one body i.e. you have no separation of powers. The FSA/FCA and the government must be the same because the FSA/FCA is not answerable to parliament and the only way that could be tolerated is by virtue of the fact that the FSA/FCA is actually the government speaking.

    The executive FSA/FCA is not supposed to make laws (the role of the legislature) or interpret them (the role of the judiciary). The role of the executive is to enforce the law as written by the legislature and for its actions to be adjudicated upon by the judicial system. I just hope this case gets before a judge that knows his constitutional law and is willing to remedy a long standing regulatory abuse.

  10. APFA take note. What are you doing about the regulator’s continuing denial to intermediaries of a longstop? Talking about it and writing letters and articles isn’t working.

  11. If I were Mr Ford, I would call Dr Debbie Harrison as a witness as she was the person from the CASS Business school who wrote a glowing report on their Life Settlement plans and was subsequently appointed to the FSA’s Financial Services Consumers Panel.
    I pointed out to the panel that her position was untenable until the Keydata debacle had some kind of court outcome, but the FSCP seems to think it appropriate for her to comment on FSCP issues, but remain silent publicly post Keydata debacle.
    Will she ever be called as a witness? Will any of the former FSA staff I have spoken to be called? I doubt it, all to embarrassing.

  12. “That was a previous regulator”

    “A big boy did it and ran away”

    “Wasn’t me gov”

    Watch this space.

  13. Standing Committee A

    23 November 1999

    6.15 pm
    Mr. Tyrie:
    When talking to the industry, I have on several occasions come across firms that feel victimised. Sometimes, they have never been investigated thoroughly; sometimes, they have, but have reached a settlement. In many cases, however, firms may think that someone in the FSA is out to get them. There is an atmosphere among some investigators in the FSA of “We must get someone”, which is not all together healthy. I am not suggesting that it is pervasive throughout the FSA, but that such am atmosphere can develop in certain cases, particularly when an American-style, Chicago-style investigative manner is generated by some of its recent recruits.
    The Minister seems surprised. She has a critical look on her face, but I can introduce her to very senior chief executives of major firms in the City who have had extraordinary encounters with one or two of the senior investigative officers of the FSA, who have behaved in such a manner and who—to use colloquial language—tried to put the frighteners on a firm.
    6.30 pm

  14. E L Wisty (an only twin) 4th August 2014 at 12:08 pm

    I am not in a position to comment on the background to Keydata, or Mr Ford’s hopes of eventual sainthood. However, if the result of his action is to give the regulator a bloody nose and, maybe, result in some much needed accountability, then I wish him well.

  15. Whichever way it goes, we’ll end up paying all the regulator’s costs. But, if Mr Ford is successful, it will prove the veracity of his claims about the way in which the FSA/FCA has misused/abused its powers and may take us a small step forward to the creation of an external overseeing body with unassailable powers to prevent the FCA acting in a similar fashion in the future.

  16. No Julian

    One entity with unassailable powers is quire sufficient – thank you!

  17. I have to agree Harry – another layer of bureaucrats and quangocrats pontificating and overseeing another lot would worry me too. Can you imagine its terms of reference !!??!!!

    This Ford guy has the right idea and if he/his case is successful will show the way forward IF you wish to challenge regulatory stupidity in a commercial world. It is unfortunately the only way and it is why more than ever properly funded collective representation of this industry is imperative – fat chance me thinks a pipe dream – without a doubt !!

    I do not know nor am I in a position to comment about the specifics of Mr Ford’s case but based solely on what has been said – I wish him luck. I just hope he has instructed a ‘magic circle’ law firm and Barrister because that’s what he will be up against !!

  18. @Harry
    Can the Regulator or its officers be sued? Not normally as there is a disclaimer in FSMA. However, Schedule 1, Part IV of FSMA says you can in two circumstances:

    1. If an act or omission is shown to be in bad faith
    2. If an act or omission is unlawful with respect to section 6(1) of the Human Rights Act (i.e. if an Act of the Authority is incompatible with the HRA)

  19. @ Grey Area

    In which case it would seem Mr Ford has a fat chance. I am (evidently) no lawyer, but the Regulatory defence is always that they act to defend the public. So I guess that scotches bad faith.

    As to human rights – I can’t see that. Perhaps if Mr Ford was a black, diabled lesbian he may have had a chance in this respect.

  20. Harry and Dick ~ do you not support the aspiration of an independent body with real and unassailable powers not just to hold the FCA to account for its misdeeds, profligacies, cock-ups and travesties of justice routinely perpetrated against intermediaries, but to order redress (from its remuneration pot) and, where appropriate, to go back to Old Kent Road?

    Or do you consider it acceptable for the present status quo to continue whereby, when someone like Andrew Tyrie points out a strong moral argument for us to be reimbursed the £118m we were overcharged by the FSA, Martin Wheatley, with impunity, can basically tell him to GFH?

  21. The regulator has a legal responsibility (under the Human Rights Act) to explore the least harmful alternatives when proceeding on an action it considers to be for the ‘common good’. The FSA had no concern for investors in Keydata, ARM, EEA when it embarked upon its crude and damaging tactics and there is no evidence it even investigated how it might mitigate the damage (this information has repeatedly been sought under the FOI Act). In the case of the disastrous Novemember 2011 announcement, it is a matter of public recird that they anticipated the damage but they made no attempt to explore less damaging alternatives. They were in contravention of the Act and as a consequence any protection from liability is void, whether personal or corporate.

  22. Misfeasance in a public office is the standard way in which people seek to avoid the statutory immunity of regulators.

    It almost never works in the area of regulation. The last big case involved the Bank of England and BCCI. It went on for years and ultimately the judge stopped the case in mid-trial as entirely hopefess.

    If Ford loses in front of the RDC, his action will be barred unless and until he has referred the decision to the Upper Tribunal. If he loses there (after a complete re-hearing which is provided in this type of reference), any law suit will have absolutely no chance of success.

  23. Adam

    Many thanks for confirming with your expert knowledge what I assumed with some logic and a lot of gut feeling.


    You must be naive if you think that another Quango will be as effective as you evidently wish it to be. It will turn out to be yet another white-washer supporting the Status Quo for which we no doubt will have to pay (yet again!).

    It’s a nice day dream, but get real! If the TSC had any teeth they would get Parliament to enact suitable amendments. They don’t because they are at root just a governmental PR exercise to keep the proletariat quiet.

  24. Not something I know much about but I understand misconduct in public office is very rarely used and difficult to make stick. Isn’t it only brought against an individual rather than an organisation and prosecuted by the CPS as a criminal case?

    What Ford is doing is suing in a civil court for damages and FSMA allows this in the circumstances I outlined above.

    Whilst any case is going to be difficult to make stick it may lift some of the veil of what goes on behind the scenes at the Regulator which will be a good thing.

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