FSCS ‘narrows down’ firms facing Lifemark, Keydata claims
More than 100 firms are no longer facing legal action from the Financial Services Compensation Scheme in relation to Keydata claims, inquiries have found.
A list of firms uploaded onto the Merrill Corporation, a secure storage website, shows that many high-profile names, such as Towergate, Helm Godfrey, Mint, Financial Ltd and Barclays have all been removed.
Inquiries have found the 103 names either no longer trade, should have never been on the list or have settled as the cost of fighting the claim was considered too steep.
Herbert Smith began issuing claims on behalf of the FSCS last November over the sales of SLS-backed Keydata products to more than 400 IFAs last year. Further letters were sent earlier this year to more than 200 firms regarding Lifemark sales.
Gareth Fatchett, director for law firm Regulatory Legal, said: “Essentially, this is a procedural move - a tidying up - but this will mean that what the FSCS will end up receiving will be far less than it first estimated.
“We don’t have an idea yet of what the final numbers will be and we will have to wait and see how many firms the FSCS will receive funds from. The FSCS is narrowing down the claim.”
Some firms settled early because they had a minimal number of sales. For example, both Towergate Financial (North) and Towergate Financial (West) appear on the list but a spokesman said that only Towergate Financial (West) had been exposed to one case eligible for a claim.
He said: “This was written in 2005 before the business was acquired by the Towergate Financial Group, but we had acquired the liability for the original sale. We have concluded the documentation behind the case was not of the standard normally delivered through Towergate Financial and thus settled the case.”
Others wanted to avoid the cost of litigation so settled early, as was the case for London-based Helm Godfrey. A statement from the firm read: “A small number of claims against us in relation to Lifemark have been settled as a result of advice we have received – in essence the cost of continuing to fight the claims would have been far in excess of the cost of the settlement.”
The statement said Helm Godfrey accepted no liability in these cases and neither has any been proven, adding: “We do, however, regret any occasion when a third-party investment company fails with a loss to investors. We are glad this matter is now closed.”
Arthur Childs, managing director of Surrey-based Arch Financial Planning, said his firm had one Keydata sale but settled to avoid the legal fees. He said: “The FSCS offered to settle for half the amount, so we did it to get rid of the issue.”
Kent-based Financial Escape took a similar view. Phil Castle, managing director, said: “A number of other firms have reached settlements. It does not mean we agree with the claims but at least we can get on with life.
“It has been hell for the past few months. The whole thing could have pulled the business down despite clients never even complaining about the products.”