The Financial Services Compensation Scheme (FSCS) revealed today that it has recovered more than £122m, of which £20m has been deducted due to the legal costs of pursuing advisers.
IFAs have therefore borne the brunt of the overall amount, contributing more than half of the total £102m in compensation which is to be awarded to clients who suffered losses due to Keydata mis-sellings.
“We have a duty to pursue recoveries where it is cost effective to do so,” said FSCS chief executive, Mark Neale. “We take that duty very seriously.”
He said the overall figure “dwarves” the costs involved in recovering the money, which “is good news for the firms that pay for FSCS protection”.
The FSCS highlighted that it takes each adviser’s ability to pay into account and therefore would not force firms into bankruptcy.
False claims
Many Keydata products falsely claimed to hold ISA status, which meant the firm was subject to £12m in unexpected tax liability which it could not pay. Once the firm had gone into administration, it was also revealed that £103m of clients’ cash, which had been invested in bonds issued by Luxembourg-based company SLS Capital SA, had been misappropriated.
“Uncertain timetable”
In December last year, the High Court rejected an application by three financial advisory firms for a judicial review in relation to complaints made about Keydata products. The firms had wanted to stall proceeds undertaken by the Financial Ombudsman Service until the FSCS litigation had concluded.
However, the High Court judge said that the ombudsman scheme was set up to “resolve disputes quickly”, and therefore investors should not be “tied to the uncertain timetable of the FSCS litigation in which they play no part and over which they have no control”.
Since the firm’s failure in 2009, the FSCS has paid £330m in compensation to Keydata clients.
The FSCS was set up to protect UK consumers when authorised firms go bust and has paid out £26bn in compensation so far.
