Legal
UK Regulator Plans To Press Ahead With Keydata Fines

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.