Nearly £60m of up-front fees and commission was paid out of Lifemark to Keydata and a British Virgin-Islands listed firm.
A leaked draft document to bondholders, seen by Money Marketing, also shows Lifemark paid Keydata £21.5m of trail commission between 2006 and 2009. A further £29m was due to be paid between 2010 and 2019.
The documents show Lifemark paid BVI firm LAS Global £38m through an agreement, giving it 10 per cent of client funds invested in its life settlement bonds for “introducing distribution opportunities”. Lifemark, which was set up by Keydata founder Stewart Ford, paid Keydata £20m through up-front fees of over 5 per cent.
Around £41.5m in total commission was paid to Keydata and the firm passed 3 per cent initial commission and 0.5 per cent trail to IFAs. Keydata International, the offshore sales arm of Keydata, was paid 5 per cent of funds invested.
LASG, whose ownership has not been confirmed, negotiated contracts for admin parties, introducing and advising on distribution opportunities and providing support on “operational matters”.
Neither Lifemark provisional liquidator KPMG nor PricewaterhouseCoopers UK could confirm LASG’s beneficial owner.
About 23,000 Keydata clients invested £349m in Lifemark, which is struggling to cover premiums due on policies and has halted investors’ income payments to help maintain liquidity.
Court documents relating to a case between Ford and the FSA reveal that the Luxemburg regulator was aware of a predicted “liquidity gap” relating to the bonds at the start of 2009. US hedge fund CarVal is understood to have provided Lifemark with £3.5m to help sustain the company and preserve policy values ahead of a possible restructuring deal.
Vintage Financial director Geoff Hartnell believes if “outrageous” commission had not been paid, Lifemark would have been left with more money to buy better quality policies and better cashflow to maintain premiums. He says: “There are other things wrong with the portfolio but it is definitely why the fund has run out of cash.”