Advice firm Chase de Vere is ‘likely’ to reach a settlement with the Financial Services Compensation Scheme by the end of week regarding client recommendations to invest in Keydata, FTAdviser understands.
Chase de Vere was named as the first of six lead cases following discussions at a case management conference in March 2013. Since then, five of the defendants have settled with the FSCS.
In April FSCS said the remaining defendant, Chase de Vere, had submitted its defence and that another case management conference was due to go ahead at the end of this week. However, a person close to the firm has said it is ‘likely’ have settled with the scheme before this goes ahead.
Some across the advice sector had expressed hopes the case, which will establish precedent for wider compensation from affected advisers, would be reconsidered in the wake of the agreements.
However, these hopes appeared to have been dashed last month when the FSCS published its latest newsletter and revealed £7.2m has been set aside in 2014 to 2015 to cover the costs of recovery in relation to Keydata.
This is close to double the £3.8m spent in the most recent financial year, when the scheme underspent on an originally budgeted £7.2m due to the legal action being delayed.
FSCS stated in the newsletter that expenses “have been less than budgeted due to lower than anticipated activity in the on-going litigation”, but that this is “planned to increase to the previous year’s levels as the cases get closer to trial”.
It added: “Given the need to have a representative set of investor claims heard by the court, FSCS is currently identifying appropriate replacement lead case defendants from the remaining pool of defendants.
“FSCS will make representations to court about its specific intentions with regard to the selection of lead case defendants at the upcoming case management conference, now likely to be scheduled in early May, when it is anticipated that further directions for trial will be made and a revised timetable will be set.”
In August 2013, FTAdviser sister publication Financial Adviser reported that the FSCS had chosen a team of six IFA firms as “guinea pigs in a high-court showdown over Keydata”.
In July 2013, Chase de Vere posted a £11.6m loss for 2012, reflecting mounting legal costs in the company’s battle with the FSCS over recompense for Keydata investments.
In its annual financial results for 2012 the company reveals it spent £14.3m on “exceptional items”, up from only £2.1m the year before.
This included £13.7m for regulatory and litigation provision including the potential fallout of the Keydata legal battle with the FSCS, as well as £600,000 for the FSCS levy, £300,000 to cover the legal costs of defending against the FSCS claim, and £300,000 for potential payment protection insurance mis-selling claims.
Last year, the FSCS sent claim letters to hundreds of IFAs in pursuit of those who recommended Lifemark-backed Keydata products.
Also last year, a Kent-based financial adviser secured a discount of more than 99 per cent in an out-of-court settlement with the FSCS over a £64,000 claim relating to Keydata investments.
Financial Escape’s annual financial results revealed the firm paid £400 of the £64,000 lawyers acting on behalf of the FSCS were seeking to recover in relation to compensation paid to clients that invested in Keydata investment funds.
In July 2013, the Financial Conduct Authority revealed it is resuming its disciplinary proceedings against Keydata founder Stewart Ford, following the Court of Appeal turning down Mr Ford’s application for permission to appeal against a High Court decision.
The Court of Appeal turned down Mr Ford’s application for permission to appeal against a High Court decision in a judicial review, which ruled that the regulator was able to use two key documents in its case.
Chase de Vere declined to comment.
