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PosSol advisers refuse to pay FSCS Keydata settlement costs

A group of 19 former and current Positive Solutions advisers have rejected demands from the firm to contribute to the cost of settling with the FSCS over Keydata. 

PosSol has written to advisers saying they must cover the professional indemnity insurance excess costs incurred by the firm after it reached a settlement with the FSCS in its legal battle with advisers. 

One letter, seen by Money Marketing, shows an adviser being asked to contribute tens of thousands of pounds. The letter adds that PosSol has negotiated a reduced policy excess of up to £2,750 per case for Keydata, compared with a standard excess of £5,000. It adds that settlement with the FSCS “was done to protect advisers involved from potential significantly increased costs and personal liability”.   

The group of 19 advisers, including three still with PosSol, are being represented by regulatory consultant Evan Owen, former chairman of the IFA Defence Union.

The group says Keydata recommendations were approved by PosSol so it should meet the costs of settling claims.

Owen says legal opinion from a third-party barrister supports the argument that the advisers are not liable to cover the costs of settlement. He says any advisers who have settled with PosSol should seek to recover the amounts. 

PosSol declined to comment.


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There are 13 comments at the moment, we would love to hear your opinion too.

  1. This will be an interesting one watch for the future.

  2. Julian Stevens 30th May 2014 at 10:30 am

    Who is at (most) fault here? The advisers who sold these failed products or PosSol for having allowed them to do so in the first place? Doesn’t PosSol, like other networks, operate an approved products panel with systems to identify and challenge any business written that falls outside that panel?

  3. I guess Pos Sol would argue that the fault lies with the adviser because the product was inappropriate for the particular client circumstances, but the advisers should argue that the product was completely flawed and the literature didn’t adequately explain how the product worked or what the risks involved were – i.e. it was unsuitable for anyone and shouldn’t have passed any vetting process undertaken by Pos Sol.

    My money’s on the advisers winning that argument hands down.

  4. I always thought it ironic that Compliance has to approve every deal, but the Adviser has to pay if it goes wrong.

    Daresay PoSol advisers wouldn’t be allowed to sell this type of deal in their new home, though…

  5. I agree with Julian. This should all have been resolved with any ARs BEFORE settling with the FSCS, especially if any of the advisers were employees rather than “self employed. Even if they were self employed, if PossSol had ANY Keydata products on their acceptable panel, NOT just the Life Settlement Plans, there are a lot of arguments even from my 20 year old knowledge of agency and contract Law, I am sure Evan Owen will be arguing on behalf of his clients.
    As Marty says, this will be an interesting one to watch.

  6. Sorry but who else is responsible? It’s life, like it or lump up but pay-up guys. With a reduced excess negotiated for you too, that’s pretty good going in the circumstances. If you didn’t like the terms, you shouldn’t have joined the club in the first place.

    Just think, we never sold a single Key Data product as we didn’t like the opacity of them and so they failed our scrutiny for clients we were advising anyway and there we are, having to cough up tens of thousands to the FSCS for the failures of others who did and who received fat commissions for their sale. Is that fair?

  7. Typical case of advisers looking to shirk their part. They are quite happy to take the commision but pass the buck to others. I would have thought they would have signed an agreement with the principle firm over who pays the excess when they joined.

  8. Julian Stevens, Clive Moore & Philip Milton,

    You guys are once again missing the point, this was not a miss selling scandal, but misappropriated funds by Directors of Keydata.

  9. @ Philip Milton – a Network member has a contract with the Network I agree (like you I believe I am not a Network member by choice). BUT if the Network have carried out due diligence on a product and placed it on their list for which no further duel diligence is requried of its appointed representative, then teh Network ahs a responsibility to get things right too. Even if they had NOT approved the Life Settlement Contracts, but had carried our due diligence of other Keydata products and deemed them acceptable/panel, then that needs to be consdiered too.

    Before Keydata’s Life Settlement Plans, we had a lot of clients who were using structured DEPOSITS provided by Keydata. These were NOT structured PRODUCTS and in particular their “Relax ISAs” which returned 9% pe annum over 5 years and by holding under £32,500 in them (most were under £10k) our clients were fully protected by the deposit taking element of the FSCS, NOT a counterparty issue as with structured PRODUCTS. To hold cash ISAs like this Keydata had to be a firm authorised to handle client money (I can’t recall who the FSCS cover was with on the cash) the point being, this requires a higher level of FSA supervision as you will know Philip (as I believe like me you have a Discretionary qualification although I have not applied for the permissions and probably will not, but my recipricol locum has them, so it made sense for me to obtain the qualification so I can support him should he be ill or on holiday and vice versa)

    Anyway, my point is none of this is as clear cut as it looks on the surfice and that ahs been cofnirmed to me personally by ex FSA staff who were part of the FSA Arrow Team appointed to Keydata and was confirmed by Dr Harrison (a member of the FCA’s Consumers Panel) in writing, shortly after the collapse of Keydata!

  10. Ex PosSol adviser 30th May 2014 at 2:04 pm

    PosSol classified the original products as Low risk. Later ones were classified as Medium risk. Many cases were either pre-approved prior to submission or checked after submission by Compliance. PosSol accepted the business and took their cut of the commission. How can it be fair that an adviser, who followed the laid down procedures, is expected to pick up the entire bill for this? PosSol are trying to walk away having paid nothing – the excesses paid by the advisers with the PI insurer paying the rest. I’m sorry but this just isn’t right! And if it went to court I don’t think any reasonable judge would uphold their case.

  11. Simon Mansell 30th May 2014 at 3:54 pm

    The irony here is that of all “Networks” PosSol had one of the most prescriptive compliance frameworks! So much so it hindered the ability of its partners to make financial decisions outside of the PssSol parameters. In practice this meant panels of pre approved providers and pre-vetting of applications before submission.

    No mis-sale took place here only mis-regulation i.e. the licensing and approval of a group that should not have been licensing or approved either by the regulator or by PosSol who then allowed the inclusion of Key Data products on their panel. Both the FSA failed and PosSol failed but look who is the scapegoat!

    Warning: Networks can kill your financial health. Only trade directly and via a Ltd or LLP

  12. Simon Mansell 30th May 2014 at 4:03 pm

    @ Philip Milton | 30 May 2014 11:07 am

    Philip you say: “Sorry but who else is responsible? It’s life, like it or lump up but pay-up guys.”

    Who is responsible:

    1. The FSA licensed and approved Key Data. Part of this process included “due diligence”. In effect, they failed as regulators.

    2. Positive Solution completed due diligence and approved this product as low risk and therefore safe for onward sale. This compliance service was paid for by members in terms of significantly higher fees than other networks charged.

    PS I am not a PosSol member and I do not have any Key Data liability. But I can smell a rate when I se one and this stinks.

  13. Hector's House 3rd June 2014 at 8:39 am

    Why are PS attempting to charge Advisers who are still with them £1000 per case, and advisers who have left them £2,750 per case?

    Sounds very dodgy to me.

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