The UK financial regulator has set out decisions for why it plans to impose heavy fines on three men who had been at the helm of Keydata Investment Services.

The UK’s financial regulator has decided to impose a £75 million ($115.5 million) fine on a former chief executive and director of Keydata Investment Services for not acting with integrity and for misleading the watchdog’s predecessor, the Financial Services Authority.

A pair of other senior Keydata managers, Mark Owen and Peter Johnson, are also to be fined by the Financial Conduct Authority. Owen is to be fined £4 million and Johnson will be fined £200,000. The three men will all be banned from working again in financial services jobs, the FCA said in a statement yesterday.

The men are appealing the decision to the Upper Tribunal of the FCA, it said.

Keydata Investment Services designed and sold investment products to retail investors through independent financial advisors, the FCA said, adding that these products were “underpinned” by Keydata’s investment in bonds issued by Luxembourg special purpose vehicles called SLS Capital and Lifemark. In turn SLS and Lifemark invested in portfolios of life settlement policies. The products were sold as eligible for Independent Savings Account status, but were not, in fact, eligible, the FCA continued.

“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 in relation to the performance of the investment products,” it said.

“The decision notices [issued yesterday] 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 regulator said. 

The FCA also said that Ford, as well as trusts set up for the benefit of his family, received £72.4 million in fees and commissions on sales of the Lifemark products and that Owen received commissions on sales of the Lifemark products in the amount of £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 said.

“In the view of the FCA, with regard to the SLS-backed products, Mr Ford deliberately concealed the problems with the portfolio underlying these products from investors, IFAs and the then FSA. It is the FCA’s view that Mr Owen recklessly relied on assurances from Mr Ford that he would resolve the problems with the portfolio’s performance and solvency and agreed to Keydata funding the income payments to investors (which should have been funded by payments from SLS to Keydata) from Keydata’s own resources although he was aware this would conceal the portfolio’s solvency problems,” it said.

“The FCA further considers that the individuals deliberately misled the FCA by making false representations to the FCA in compelled interviews about the performance of the investment products, having failed to disclose to the FCA problems with the SLS portfolio which impacted on the SLS products’ performance. Further, the FCA considers that Mr Johnson failed to ensure the FCA was aware of problems with the products and their financial promotions, identified by Keydata’s professional advisors and that Mr Ford and Mr Owen failed to disclose to the FCA the significant personal benefits and commissions they received from the sale of the Lifemark products, when they were aware of the FCA’s concerns around their involvement in Lifemark and the commissions they received,” it added.

The FCA said the three men applied unsuccessfully to the Tribunal for an order preventing the FCA from publishing its decision notices.