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FSCS settlements recover £52m from Keydata IFAs

FSCS settlements recover £52m from Keydata IFAs

The Financial Services Compensation Scheme has secured more than £122m in recoveries relating to the failure of Keydata Investment Services, with £52m coming from out-of-court setttlements related to its litigation against independent financial advisers.

After deducting costs, the current tally is £102m, according to the scheme. Last year FTAdviser reported that the settlements were at least £12m, after chief executive Mark Neale revealed costs of this amount had been covered by recoveries.

The case has run since November 2011, with larger defendants having already reached settlements, leaving only smaller firms as part of the action.

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After Chase de Vere became the last of the original six lead defendants to settle last year, a new list of 15 firms were identified as lead defendants, from 63 remaining who had not yet reached a settlement.

In a lengthy update published today, the FSCS confirms it has now settled with all of these 15 defendants and has, in fact, reached agreement with all but 10 of the original list of 820 implicated adviser firms.

It said further directions will be required from the court as to how the remainder of the proceedings should be managed.

As of 18 February 2015, FSCS said it has incurred legal costs in the sum of £15.8m in pursuing these recoveries against IFAs.

Mr Neale reiterated that the scheme has a duty to pursue recoveries where it is cost effective to do so.

He said: “It benefits the industry by returning money to the firms that pay our levies, so I am happy to confirm that our work in this area delivers results.

“We have achieved £122m in recoveries so far. That figure dwarves the overall costs of achieving them - in fact it does so by a margin of more than five-to-one - that’s good news for the firms that pay for FSCS protection.”

Keydata is the biggest investment failure the FSCS has had to deal with. It has paid £330m in compensation to consumers since the failure of the firm.

Late last month the Association of Professional Financial Advisers called on the FSCS to help remaining defendants in the Keydata sales case, with director general Chris Hannant stating it should make every effort to contact the outstanding litigants and attempt to broker a settlement.

At the end of last year, a High Court judge dismissed claims for judicial review from three financial advisers over five Keydata decisions handed down by the Financial Ombudsman Service, which they had hoped to have stayed until after the FSCS action had completed.

peter.walker@ft.com