The Financial Ombudsman Service has provisionally upheld two complaints against IFAs who recommended clients to invest in Keydata products but has only awarded compensation in one case.
Both cases centre on the suitability of the unnamed advisers’ recommendations to invest in Keydata SLS products in 2005. In the first case, the clients, referred to in the provisional decision as Mr and Mrs K, invested £60,000 in Keydata. In the second case, the client, Mr W, invested £15,000 in Keydata as part of a wider portfolio.
In the provisional decisions for both cases, FOS principal ombudsman Tony Boorman says it is clear the Keydata products presented greater risk than the clients were prepared to take.
In Mr and Mrs K’s case, the IFA was ordered to pay compensation of the capital invested less any withdrawals, distributions of capital or pre-tax income.
The IFA also has to pay a return of 4 per cent from the time of the investment until November 4, 2008 and then a return of 2.5 per year compounded annually from the date of investment until November 13, 2009, when Keydata defaulted.
The IFA will be required to pay this amount up to a maximum of £100,000. Interest of 2.5 per cent a year will be added from November 2009 until the award is paid.
In the second case, Boorman judged that although the Keydata recommendation was unsuitable, it formed part of thoughtful and considered advice overall, so he did not make any award against the adviser.
Philip J Milton & Company managing director Philip Milton says: “I am bemused the FOS has not maintained a consistent stance. It should have awarded compensation in both cases.”
The FOS declined to comment on the cases.