A court has upheld the Financial Conduct Authority's decision to fine and ban the former chief executive of failed investment firm Keydata.
Last year Steward Ford, who headed up Keydata when it collapsed in 2009 at a cost of hundreds of millions of pounds to the industry in compensation to investors who lost their life savings, was fined £75m by the FCA while former Keydata sales director Mark Owen was fined £4m.
Today (November 6) the Upper Tribunal upheld the FCA's action against Mr Ford and Mr Owen and ruled both had acted without integrity and had failed to deal with the City watchdog's predecessor, the Financial Services Authority, in an open and cooperative way.
As a result Judge Roger Berner directed the FCA to fine Mr Ford £76m and Mr Owen £3.2m and agreed both should be prohibited from performing any role in regulated financial services.
Those who commit such misconduct have no place in the financial services industry.He said: "We are entirely satisfied that Mr Ford's conduct demonstrated a consistent failure by him to act with integrity in carrying out his controlled function.
"Indeed [...] we regard that conduct as of the most egregious kind. We consider that Mr Ford consciously and deliberately set aside his regulatory responsibilities in pursuit of entrepreneurial ambition."
With regards to Mr Owen, Mr Berner acknowledged he knew far less than Mr Ford and he was subject to the latter's "lack of candour".
But he said: "The authority’s case against Mr Owen is that what he did know should have alerted him to the need for sales to be halted, the authority to be informed and for immediate further investigations to be commissioned.
"We agree with the authority's submission in that regard."
Keydata Investment Services designed and sold life settlement policy-based investment products to retail investors via independent financial advisers.
Products were underpinned by investments in bonds issued by Luxembourg vehicles SLS Capital and Lifemark.
From December 2005 to June 2009, more than 37,000 investors purchased the products, investing more than £475m.
In the Lifemark Bonds alone, £373.2m was invested by 30,906 retail customers, via IFAs.
The Financial Services Compensation Scheme has subsequently made payments to investors in the products of more than £330m.
Over the three years from 2009, Mr Ford was able to extract fees from the structure totalling around £73.3m.
Mr Berner said: "Mr Ford extracted substantial fees from both the SLS and Lifemark structures which could not be justified commercially.
"Mr Ford had, and continues to have, no conception of the clear conflict of interest that was created, and the conflict that actually arose to the detriment of retail investors who had entrusted Keydata with their savings."
Mr Owen received £2.5m in undisclosed commissions from Mr Ford but both Mr Ford and Mr Owen claimed these payments were unrelated loans, which the Tribunal concluded was a "fabrication".
Mr Berner added: "A constant theme is the deliberate and calculated concealment by Mr Ford of material information, both as to the fees being extracted by Mr Ford, and as to the serious issues that arose with respect to both the SLS and Lifemark Products, from Keydata's compliance officer, investors, IFAs and the authority.
"That concealment itself demonstrates a clear lack of integrity on the part of Mr Ford."
During its investigation, the FCA received assistance from the US Securities & Exchange Commission as well as Luxembourg's CSSF, the Guernsey Financial Services Commission, the Cayman Islands Monetary Authority and the Central Bank of Ireland.
Mark Steward, executive director of enforcement and market oversight at the FCA, said: "Keydata sold complex structured products backed by life settlements based on misleading brochures and without properly assessing whether the products could meet what was promised.
"The tribunal found that Mr Ford bears primary responsibility for this, deliberately setting aside his regulatory responsibilities driven by his desire to maximise and preserve financial gain for himself.
"Those who commit such misconduct have no place in the financial services industry."
damian.fantato@ft.com
