Financial Services Compensation Scheme chief executive Mark Neale has vowed that court action that aims to ensure recoveries from hundreds of advisers that recommended Keydata will pay off, despite its accounts revealing costs have spiralled into the millions.
In the first of a two-part video interview with FTAdviser’s Emma Ann Hughes, scheme chief executive Mark Neale confirmed figures in its accounts that close to £4m was spent on the litigation last year and more than £7m has been set aside for this financial year, adding that the 2012/2013 total was around £8m.
Mr Neale also confirmed settlements have now been reached with each of the original six lead defendents for undisclosed sums.
The move leaves the scheme’s lawyers seeking new test defendants - it is now apparently revewing firms with no professional indemnity insurance - and some had questioned whether the case would ultimately prove financially worthwhile.
However, Mr Neale stated simply that the scheme “will only pursue recoveries where it is economically advantageous to do so”, adding that he remains “very confident that we will more than recover that we have incurred in pursuing recoveries from [advisers that recommended] Keydata”.
In its latest newsletter FSCS revealed £7.2m has been set aside in 2014 to 2015 to cover the costs of recovery in relation to Keydata, 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 delay.
Mr Neale said: “The position is, in common with all litigation, we will reach settlements with the firm against whom we are taking action where it is economically advantageous to do so compared to going to court.
“We have reached settlements with a number of firms.”
On the subject of when advisers can expect an end to the Keydata compensation saga, Mr Neale said: “I would be a brave chief executive to predict exactly when the Keydata cases will come to a conclusion but we have made very good progress and recovered very large sums of money for the industry.
“We have recovered £44m for example, last year. That is money that offsets the compensation costs we have incurred and goes back to the industry.”
When asked would the compensation scheme consider chasing cash through the courts in the way it has with Keydata in the future, Mr Neale said he would pursue this course of action again as this helps it to reduce costs across the sector.
He said: “We will always pursue recoveries where it is economical to do so because that is one way we can reduce the costs that we impose on the industry.”
