The Financial Conduct Authority has fined Chase de Vere Independent Financial Advisers £560,000 ($876,100) for failures over the sale of Keydata products.

The Financial Conduct Authority has fined Chase de Vere Independent Financial Advisers £560,000 ($876,100) for failures over the sale of Keydata products.

The UK financial regulator said in a statement that Chase de Vere’s advisors had “failed to disclose to its customers certain distinctive features and risks of the Keydata products in a way which was clear, fair and not misleading”.

According to the FCA, Chase de Vere sold Keydata life settlement products to 2,806 customers who invested a total of £49.3 million between August 2005 and June 2009.

The Financial Services Compensation Scheme has paid compensation to eligible customers up to the scheme limit, which was £48,000 per customer at the time.

The FCA said 39 customers invested a total of £4.4 million over the scheme limit and the majority of these customers may not recover the full losses arising from their investment.

Thee watchdog said Chase de Vere had not researched the Keydata products well enough to understand the risks they posed to customers and had also failed to ensure that its advisors understood those risks. This resulted in advisors not explaining the risks of investing in Keydata products properly to customers, which the firm made worse by ceasing to provide standardised wording to advisors to help them describe the risks.

“Firms need to ensure that they fully understand and explain to customers the risks of investing in the products they are offering. That includes researching the products thoroughly before they decide to offer them and ensuring advisors have the tools they need to explain the risks to customers. Chase de Vere failed to do this, leaving its customers without a full understanding of the risks they were taking by investing their money in Keydata products,” said Tracey McDermott, FCA director of enforcement and financial crime.

The FCA considers that had Chase de Vere researched the Keydata products properly from the outset, the firm would have realised that they had distinctive features and risks requiring additional controls and restrictions on sales, particularly to customers with a cautious attitude to risk.

Chase de Vere has agreed to review its sales to any customers who have not already made a claim to Chase de Vere or the Financial Services Compensation Scheme about Keydata, and to provide redress where appropriate.

Keydata Investment Services was a product provider that designed and distributed structured investment products, distributed via a network of independent financial advisors. The Keydata life settlement products were investments in corporate bonds whereby Keydata purchased bonds which were issued by one of two Luxembourg based companies, SLS Capital SA and Lifemark SA, which used the money raised to buy portfolios of life insurance policies from predominantly elderly US citizens.