Former Keydata finance director Craig McNeil has expressed his anger at the regulator’s enforcement process following his fine and ban.
Mr McNeil branded the Financial Conduct Authority’s plans to fine him £350,000 and prohibit him from working in the industry a politicised decision that is “ill-informed, inaccurate and self-preserving”, also calling it a “stitch up”.
In a statement today (22 September), the City watchdog stated he should have warned them that £4.2m in income payments to investors were funded from company resources.
Keydata Investment Services designed and sold products underpinned by its investment in bonds issued by Luxembourg special purpose vehicles, including one called SLS Capital, which in turn invested in portfolios of life settlement policies.
After Keydata was put into administration in June 2009, the FCA stated its administrators discovered that SLS had failed to make certain payments that were due 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 portfolio, which Mr McNeil should have warned the regulator about.
Further, the FCA ruled that as finance director, 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, according to the regulator.
Mr McNeil responded that the FCA misled him into agreeing to settle this in 2011. “They withheld key information from me with respect to both allegations and then broke their side of the bargain by dragging out the rest of the process for another four years when they’d promised to finish matters ‘as soon as practicable’.
“Keydata covered payments to investors and advisers from its own resources during the period of the alleged SOP 4 breach. I reported this exposure on our FCA financial return in March 2009. The FCA ignored this disclosure because no one at the FCA looked at this financial return.
Mr McNeil continued that the FCA’s claim that he should have explained what was happening in words of one syllable is “nonsense” and that from 2005, the regulator had “substantial involvement” with Keydata’s London and Reading Offices, including many meetings with management and staff; none of which involved him.
“To claim that it was my job to tell them about the operation and the products is clearly untrue.
“It has taken the FCA four years to realise that a transaction that they claimed I erred in did not in fact take place. They finally accepted this last month, but it didn’t alter their pre-determined decision to fine and ban me for it anyway.”
Mr McNeil called the FCA’s closure of Keydata “particularly harmful to the investing public” and said that those who defrauded the SLS investors have escaped without any meaningful sanction.
“The FCA were determined to be seen taking action against all the Keydata management to cover the regulator’s own mistakes. They have done this by hook and by crook including offering work to my legal advisers.”
A spokesman for the FCA declined to comment on Mr McNeil’s response to his fine.
emma.hughes@ft.com
