Keydata founder Stewart Ford faces £75m fine over ‘mis-sold death bonds’Comments Off on Keydata founder Stewart Ford faces £75m fine over ‘mis-sold death bonds’
Stewart Ford, the chief executive and founder of Keydata Investment Services, is in line for the huge penalty from the Financial Conduct Authority along with former sales director Mark Owen and ex-compliance officer Peter Johnson, who were set to be fined £4 million and £200,000 respectively.
All three are appealing the penalty notices. Keydata collapsed into administration in 2009 over a £12 million tax bill for its investment products, which were sold as eligible for tax-efficient ISAs, but in fact failed to qualify.
The firm used financial advisors to sell bonds issued by two Luxembourg companies — SLS and Lifemark — which were based on US life-insurance policies. Customers were effectively buying the rights to the payouts on the death of the policyholders but they lived much longer than expected, hitting the performance of the bonds.
The Financial Conduct Authority said today: “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 on a number of occasions”.
It claims the trio 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”.
According to the decision notice more than 37,000 investors bought the products, pumping in over £475 million.
The Financial Services Compensation Scheme has so far paid in excess of £330 million in compensation to investors, leaving the rest of the fund-management industry picking up the tab.
The FCA claims Ford and trusts set up for his family raked in about £72.4 million in fees and commissions on Lifemark products while Owen received £2.5 million.
“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,” it added.
In August Ford wrote to the FCA threatening to sue it for “grevious, irreparable harm” to his reputation and financial losses after its investigation in 2010.
An FCA spokesman said today no claim had been received so far.