The FCA is seeking record fines against three former managers of Keydata Investment Services, claiming the company missold complex products to consumers.
The watchdog has fined former chief executive Stewart Ford £75m, former sales director Mark Owen £4m and former compliance officer Peter Johnson £200,000, and wants to ban them from working in regulated financial services again.
The FCA today published decision notices relating to the tribunal where the case will be heard. The three men had unsuccessfully sought to keep the decision notices, which detail why the FCA is seeking the fines, from being published.
In the FCA’s view, Keydata Investment Services (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 called SLS Capital S.A (SLS) and Lifemark S.A (Lifemark). In turn SLS and Lifemark invested in portfolios of life settlement policies. The products were sold as eligible for Isa status, but they were not, in fact, eligible.
In the FCA’s opinion Mr Ford, Mr Owen and Mr Johnson failed to act with integrity and also misled the then Financial Services Authority (FSA) on a number of occasions in relation to the performance of the investment products.
The decision notices set out the FCA’s view that the three individuals permitted Keydata to continue to sell the Lifemark-backed products to retail investors when the individuals were aware that it was highly likely the products did not comply with the ISA regulations, that the financial promotions were unclear, incorrect and misleading, that the due diligence on the products was inadequate and that there were problems with the performance of the portfolio ultimately underlying the products.
The FCA also noted that Ford and trusts set up for the benefit of his family received £72.4m in fees and commission on sales for the Lifemark products. Owen received £2.5m-worth of commission.
“In the FCA’s opinion, Mr Owen’s commissions were not properly disclosed, nor was Mr Ford’s conflict arising from the payment of these fees and commissions adequately managed,” the watchdog said.
However, Ford said is planning to file a high court claim against the FCA and PwC for damages "in the order of £650m".
In a statement, he claims that during the FCA's previous incarnation as the FSA it knowingly exceeded its statutory authority to bring down Keydata, to prove it still had teeth in the aftermath of the financial crisis.
Dan Schwartzman, PwC's head of clients and markets, is named as having provided the FSA with what Ford dubs a "dodgy dossier", enabling the watchdog to take action against his business.
Ford said: “The past six years have been a nightmare for myself, my family and the former employees of Keydata.
"We were tossed aside by a regulator who was hell-bent on destroying a successful and well run business in order to justify its continued existence. The FSA failed at every level and, quite rightly, was abolished in 2013. I only hope that I am able to highlight what they did before its successor, the FCA has the chance to destroy others in the way that they destroyed me and Keydata."
PwC said: “We have had no contact from Mr Ford, so are unable to comment on his alleged claims. We do not believe he has any grounds to bring an action."