A lawyer representing Keydata advisers has called for an independent inquiry of the FSA’s handling of the collapse of Keydata, as he reveals a body of evidence on what the regulator knew about the firm and when.
The lawyer, who wishes to remain anonymous, says information gathered through Freedom of Information requests shows the regulator had been investigating Keydata and its products for three years before its collapse in June 2009 yet failed to alert the market to potential problems.
It shows an FSA risk assessment committee judged traded life settlement funds to be high risk in April 2008. However, it concluded no regulatory action was necessary because uptake of the products was low.
The information also shows that by December 2007, the FSA had carried out extensive supervision work with Keydata including site visits.
The regulator also discussed taking action against the firm, including ordering it to carry out a skilled persons review and suspend business activity, at a meeting in December 2007.
But the lawyer says that in the FCA’s FAQs on Keydata on its website, it implies that it only reviewed the distribution of the products, and not the products themselves.
In 2007 the FSA visited 11 advice firms to review the marketing and distribution of Keydata bonds. The review found widespread failing relating to the sale of the bonds.
The lawyer says: “All this cries out for an effective and independent investigation to throw light on the FCA’s behaviour and to address victims and advisers’ distress and anger at the facts that have now emerged.”
He also claims the regulator has hampered his enquiries by giving incomplete and late responses to FoI requests.
He plans to make key documents from the requests public on a website for Keydata investors.
In January, the Information Commissioner’s Office ruled the FCA breached the Freedom of Information Act by failing to respond to a FoI request related to its investigation into Keydata.
A spokesman for the FCA says: “Since 2009, we have placed increased focus higher in the chain (i.e. at the design phase of products) and on identifying these problems before consumer detriment occurs.
“This new regulatory focus has led to greater involvement by the FCA in particular products where detriment is foreseeable. In such cases we are now more willing to make public statements warning the market of our concerns, rather than relying on firms to make the right decisions on their own.”