FSCS should act now to help victims of Keydata

By RICHARD DYSON
Updated:


Pressure is mounting on the Financial Services Compensation Scheme, the body set up to pay investors who lose money when regulated firms go bust, to declare whether it will step in to assist thousands of savers with Keydata.

The specialist firm was placed in administration on June 8, ostensibly on the grounds of tax irregularities. But other, more sinister developments, such as the apparent absence of assets, quickly emerged. Since then, panic has been rising among a group of investors who fear their money may be entirely lost.


British bank notes

Panic has been rising among a group of investors who fear their money may be entirely los

In most savers' cases, Keydata acted as an administrator, but about 6,000 savers had investments directly controlled by the firm.

And the assets underlying these investments, which were complex securities controlled in Luxembourg, are not accounted for.

Dan Schwarzmann, Pricewaterhouse-Coopers' lead administrator on the case, has held out little hope of the money being recovered.

As a result, these investors - whose accounts were called Keydata Secure Income Bond Issues 1, 2 and 3 - can only pin their hopes on the FSCS.

John Joseph, of John Joseph Financial Services, in Borehamwood, Hertfordshire, sits on the Keydata Creditors' Committee, whose role is to represent all the parties, including private investors, who have a claim.

He believes that because Keydata was fully authorised and regulated, any loss should qualify for compensation. 'I cannot see how the FSCS cannot become involved,' he says.

The FSCS says its remit permits it to become involved only where investors have lost money and where blame for the loss can be laid at the door of a regulated UK company.

Its investigations are thought to be focused on establishing whether Keydata was to blame, or whether culpability rests with the Luxembourg partner, where the assets went astray. If the latter case emerges, the FSCS may not pay.

It has said only that it 'is doing everything it can to complete the investigation' and has promised to update savers by the end of this month.

But Joseph says: 'The FSCS seems quick to send out invoices when it needs to raise money, and slow to deal with cases where savers need to be reimbursed.'

  • In the above article we said Keydata's Secure Income Bond Issues 1, 2 and 3 were investments 'directly controlled' by Keydata. In fact the bonds were marketed by Keydata, but were issued by a Luxembourg firm SLS SA and managed by other firms contracted by SLS.


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