FSCS criticised for not reviewing files over Keydata

The Financial Service Compensation Scheme’s allegation of IFA negligence in relation to Keydata has been made without viewing any of the IFAs’ files and it is highly likely that a good legal defence can be mounted against the litigations, according to law firm Regulatory Legal.

At the beginning of October, Herbert Smith Solicitors, acting on behalf of the FSCS, sent a number of letters to IFA firms as part of a series if law suits to recover payments from advisers that recommended certain Keydata products.

Regulatory Legal claimed the allegation of negligence is seemingly made without sight of the IFA’s file “and the FSCS payments were, we understood, generally made where the brochure was deemed misleading”.

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The law firm is in communication with around 100 IFAs who may face claims and is setting up a group designed to obtain counsel’s opinion, before a decision can be made on placing all cases on hold and defending one lead case in court. 

Regulatory Legal Solicitors ran a series of free seminars in London, Birmingham and Manchester last week for IFAs who received this letter. The firm said that IFAs may need advice on without-prejudice meetings with Herbert Smith if willing to settle. 

Dexter Perrott, a director for Regulatory Legal, said: “Not one firm which attended our seminars was asked for their file by the FSCS when the claim was investigated. 

“It seems surprising that the firm is now deemed to have given negligent unsuitable advice, presumably based on assertions made by claimants that they were cautious investors, yet without sight of the factfind or attitude to risk. 

“The original basis of the claim made to the FSCS, and the various failures and causation issues which ultimately led to the loss, are not mentioned in the claim letter. 

“The complainant may even have stated to the FSCS that they had no complaint against the IFA. A legal opinion may well suggest that a very good defence could be mounted to the claim.”

A spokesperson for the FSCS said: “The Financial Services Compensation Scheme pursues recoveries whenever practical and cost effective to do so. We believe claims may exist against independent financial advisers for compensation costs relating to certain Keydata Investment Services Ltd products.

“As a result, we have issued legal proceedings to protect against the limitation period while we analyse the potential claims in detail. We cannot comment further at this stage.”