View more on these topics

The FSCS quandary over its Keydata legal battle

Terence-Dickens-Foot-Anstey-MM-Peach-700.jpg

The request by the Financial Services Compensation Scheme’s lawyers to delay a case management conference on Keydata has raised questions over the viability of its litigation.

The FSCS has been seeking new lead case defendants since January as part of efforts to recoup some of the £400m it has paid out in compensation over products sold by the firm. It originally selected six lead case defendants last year, with one firm, Investacc, formally receiving notice that the case against it had been closed in December.

Following settlements agreed by the FSCS with all but one of the original lead case defendants, the court was due to consider the selection of new lead case defendants at a case management conference on 21 March. Lawyers acting for the FSCS have now asked for the conference to be delayed until May. Only Chase de Vere remains a lead case defendant from the original selection. 

There is a consensus that the court must be satisfied there are sufficient lead case defendant cases to cover both the variety of Keydata products (both SLS Capital and Lifemark) that were sold and the range of allegations made by the FSCS.

It is believed the FSCS is having difficulty in identifying potentially suitable candidates to replace the original lead case defendants and is also meeting resistance from the potential candidates that have been identified. 

Where firms may look like suitable candidates, matters may be complicated by the firms’ individual circumstances.

The FSCS appears to be in a quandary. If an unsuitable test case is taken to court, several things could happen. For example, the lead case defendant could take the opportunity to settle, which would potentially put the FSCS back to square one
as the court will not have made any substantive determinations. 

Alternatively, even if the case were to proceed and principles be established to be rolled out to the non-lead case defendants, there may not be sufficient guidance for all classes of defendants covering the wide variety of Keydata products in issue. 

The court may also be reluctant to establish principles of general application to the non-lead case defendants in situations where firms have been prevented from mounting a proper defence because of their circumstances.

Ultimately, the FSCS may be required to risk proceeding with potentially unsuitable lead case defendants and
bear the associated costs this will bring. 

The alternatives are to settle with the remaining defendants or draw a line under the case altogether.

The messages emanating from the FSCS are that it remains convinced it has a strong case to pursue.

It told Money Marketing: “Proceedings remain stayed against all remaining defendants not selected as lead case defendants, and the FSCS is in the process of identifying appropriate replacement lead case defendants from the remaining pool.”

The FSCS says it will tell the court of its intentions over the selection of lead case defendants at the rescheduled case management conference. But it remains unclear what these representations will look like, how the court will receive them and, importantly, the suitability of the remaining candidates.

Terence Dickens is an associate at Foot Anstey 

Recommended

UK-Currency-Money-Pound-GBP-700x450.jpg

Analysts predict ‘demise of individual annuity market’

Analysts at Barclays predict Chancellor George Osborne’s “pensions bombshell” will see the individual annuity market contract by two-thirds in the space of 18 months. In the Budget, Osborne revealed a radical shake-up of pension rules which will mean that from April 2015 anyone over the age of 55 will be able to take their entire […]

Legal-and-General-LG-500x320.jpg

L&G and Pru announce bulk annuity deals totalling £3.6bn

Legal & General and Prudential have announced separate bulk annuity deals with the ICI Pension Fund covering total liabilities of £3.6bn. The L&G deal accounts for £3bn of the fund’s liabilities, which the insurer says is the largest ever bulk annuity purchase arranged by a pension scheme in the UK. L&G  has £34.4bn in annuity […]

Alistair-Conway-outdoors-in-2013-700.jpg
1

James Hay posts 25 per cent profit drop despite sales boost

James Hay saw profits fall 25 per cent in 2013 from £9m to £6.7m, due to lost revenue on maturing Sipps and £3.1m in IT costs associated with product development. James Hay parent IFG Group posted the results this morning. The results say: “Revenue was marginally down on the previous year as the loss of […]

Tech-Technology-Computer-Binary-700.jpg
1

Platforms struggle to meet Budget drawdown reforms

A raft of platforms will struggle to be ready in time to offer savers access to the new higher maximum income withdrawal limit set out in the Budget.   In his Budget speech last week, Chancellor George Osborne revealed explosive reforms to pension flexibility which will see people over the age of 55 able to […]

When will US rates rise?

By Felix Wintle, Investment Director & Head of US Equities The most recent communication from Federal Reserve chair Janet Yellen has put the market’s sights on September as the most likely month for the first rate rise. This is due to the stronger than expected economic data of late, particularly in employment and housing, which […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. This was a fatally flawed legal claim from outset.

  2. Could it be concluded that if cases cannot be brought successfully against the original selling advisers then the FSCS’s unilateral decision to compensate investors was flawed? It can’t work both ways.

    Surely, FSCS could start legal proceedings against each defaulting adviser, one by one and starting with the largest in monetary terms (eg Chase de vere) and use the success of the first claim as a precedent to encourage early settlement by the others (or/and their insurers). Legal costs should flow from the loser so a nasty penalty for any who decide to fight individually… proportionality could apply to very small cases.

    Otherwise the principle is that FSCS shouldn’t be paying-out OUR money to investors if it doesn’t then try to recoup as much of it as they can from advisory firms/liquidators/insurers when they are still there to cover their own liabilities to clients – regardless of the pluses and minuses of the original advice and responsibility, etc.

  3. There must be successful investors in Keydata before the debacle. Why not prosecute the sellors of those investments? After all wrong advice is wrong advice.

Leave a comment

Close

Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm

Email: customerservices@moneymarketing.com