Inside Britain’s deathbonds scandal
We don’t very often post blogs with links to other articles, but today we are making an exception.
This article on Reuters is a compelling read. It explores the Keydata and Lifemark investment story, revealing for the first time some of the drama that was unfolding behind the scenes as the scheme went bad for investors:
There has been good news for Keydata Lifemark investors this week, as the Financial Services Compensation Scheme (FSCS) agreed to pay out on claims made by investors.
The details of this compensation are still scarce. The FSCS has said it expects to be able to compensate ‘eligible investors’. Those with money in the scheme will need to wait to see what ‘eligible’ means.
Whilst good news for investors, it is quite bad news for the majority of independent financial advisers who did not recommend their clients put money in the investment scheme.
Firms like Informed Choice stayed away of this esoteric and opaque investment scheme, but will still be required to contribute toward the levy raised by the FSCS to compensate victims of the scheme. The levy could be as high as £350m which would result in a significant bill for us.
Whilst we are generally supportive of the Financial Services Compensation Scheme and recognise the importance of this protection scheme in delivering investor confidence, we do believe there are questions to be answered before IFAs have to start contributing towards this compensation.
These questions include looking at the role of the FSA in this saga and also examining the actions of those independent financial advisers who did recommend Keydata to their clients. In the first instance, we think that IFAs should repay all of the commission they were paid for selling these investments.
The FSA should also take a hard-line against advisers who made unsuitable recommendations to invest in the Keydata Lifemark scheme.
The Reuters article mentions two cases where the investors were told by their IFA to put their entire wealth into the scheme. Where poor advice like this has been delivered, the adviser in question should pay up and be censured for their role.
Another important issue to address is why Keydata is being categorised as an investment intermediary for the purposes of the Financial Services Compensation Scheme, when it looked much more like an investment provider. This categorisation has an impact on which part of the retail financial services sector pays the bulk of the compensation.
Please take the time to read the article. You never know; it might even help you to spot the warning signs of a terrible investment scheme in the future before it is too late.
Photo courtesy of Mr.Thomas