FCA in the dock

Financial Adviser

The Keydata saga just keeps getting worse. Earlier this week, the FCA announced it was fining three key individuals at Keydata, responsible for the losses involved by the sale of these life settlement-backed products.

The founder of the company, Stewart Ford, was fined £75m, in recognition of his and his family’s benefit from the products; Mark Owen, the former sales director, was hit with a £4m and Peter Johnson, the former compliance officer was fined £200,000.

The story has to be an object lesson in how not to run an investment company: the portfolio was underpinned by investments in traded life policy investments, taking a bet on the US citizens’ life expectancy. They are high risk investments, intended for sophisticated, high net-worth investors, and they are not Isa-able.

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The FCA said the promotions were misleading - clients were told they could be put into an Isa and they were marketed to retail clients.

But it seems everyone was in denial over the policies. Mr Ford did not do the right due diligence on the Lifemark products, despite being told otherwise by professionals. Then, said the FCA, when the portfolio was performing badly, Mr Owen was also in denial, “recklessly” relying on assurances from Mr Ford that all would be well.

But perhaps the biggest criticism has inadvertently been made for the FCA itself. It claims the regulator was severely misled by Mr Ford - he insisted the products were on track.

The findings are being contested by the three, but surely the regulator should have been on the case. It talks about a “compelled interview” where these discussions took place, so clearly they were alarmed. But does the all mighty regulator really not possess the powers to prevent the wool from being pulled over its eyes, in the middle of an investigation?