The Financial Conduct Authority (FCA) has fined Craig McNeil £350,000 and prohibited him from performing any significant influence function.
Keydata Investment Services Ltd (Keydata) designed and sold investment products to retail investors via IFAs.
The products were underpinned by Keydata’s investment in bonds issued by Luxembourg special purpose vehicles, including one called SLS Capital S.A (SLS).
In turn, SLS invested in portfolios of life settlement policies.
After Keydata was put into administration in June 2009, Keydata’s administrators discovered that SLS had failed to make certain payments that were due to Keydata in respect of the products since early 2008 and that Keydata had instead funded £4.2m in income payments to investors from its own company resources.
The regulator ruled this had the effect of masking problems with SLS and the performance of the SLS portfolio and Mr McNeil should have warned the City watchdog that this was going on.
In his role as Keydata’s finance director, Mr McNeil was aware that Keydata continued to make such payments and failed to ensure the provider reported the matter to the FCA.
Further, as finance director, the FCA ruled Mr McNeil failed to challenge a decision in late 2008 to enter into a complicated transaction which attempted to obtain security for the missed SLS income payments.
He permitted the release of £500,000 of Keydata’s corporate funds without having a clear understanding of the transaction or its risks.
Although Keydata paid the funds to the seller, the FCA found Keydata did not, in fact, obtain the security.
Georgina Philippou, acting director of enforcement and market oversight at the FCA, said: “The FCA relies on senior directors such as Mr McNeil to let us know about significant risks in their firms, especially when they have a direct bearing on customers’ investments.
“It was not reasonable in the circumstances for Mr McNeil to rely on the fact that other directors might eventually tell us what was happening.
“If Mr McNeil had acted, and acted quickly, concerns about SLS may have come to light sooner. Further, as Keydata’s finance director, Mr McNeil should have understood the risks of the transactions he was authorising.”
FCA decision notices were previously issued for Keydata’s Stewart Ford, Mark Owen and Peter Johnson. These cases have been referred to the Upper Tribunal.