FSCS offers to slash bill for IFAs who sold Keydata

Presumably this discount is offered to those firms who have been found guilty by the FOS?

If they are for all firms who sold a case then they should be wary of settling for a discount as it surely implies some guilt?

So, if you sold Keydata, you can get a 50% reduction. This means there is 50% less in the pot. I didn't sell Keydata or MF Global, so I pay a higher levy than I would have to if they pursued the sellers for 100%.

Well, that sounds amazing to me. Put me down for two of them.

"......the FSCS also recognises that the parties to this litigation are likely to incur substantial costs if these claims are pursued to trial"

and those IFAs who are NOT party to this litigation will incur substantial costs by way of increased levies if these claims are NOT pursued to trial?

What about an even bigger discount for all those who DIDN'T sell any KeyData life settlement products? I seem to recall reading that a refund from the FSCS was in the pipeline for something or other ~ what's happened about that?

My sentiments entirely Paul. This beggars belief.

Never sold keydata products or any of the others that we have already paid for.

Last year I paid the same as my mortgage payments for something I didn't do. The FSA regulated those firms to do what the did so it is their fault not mine. I have always had a clean record and pay my regulators and insurance for protection so why should we pay for other peoples mistakes mainly the FSA's.

Maybe they will give a 50% discount on fees for anyone who didn't sell Keydata?

I wont hold my breath.

Is this because they dont have a leg to stand on?

So let me get this right.

The mugger last saturday night was in the process of snatching the wallet from an unsuspecting member of the public [ Mr X] and steal the contents.

MR X starts to put up a fight.

'Tell you what' says the mugger, 'you agree to hand over just half the contents of your wallet on this occasion and I will leave you alone for now .... but I will be looking out for you next week and this offer will not be repeated - next week I want it all.

To Evan Owen ~ There's UK Law and there's FSA Law. The two are frequently very different things. What if all the affected parties get together, take legal advice that concludes they aren't or at least certainly shouldn't be deemed liable and, as a result, they all refuse to pay anything? Tough ~ pay up or pack up.

You cant make this stuff up !!

Every IFA is entitled to rely on the FOS service before agreeing any 'out of court' settlement.

If the client files are compliant, proper attitude to risk recorded etc why would they simply give away cash for what appears to be criminal activity by others?

I am not saying the FSCS is right...., but

By paying 50% of the 'claim' - will it allow those Firms to continue to trade (net result, less claims fall on the FSCS in the future)

By receiving 50% of the 'claim', it does refil some of the FSCS coffers.

If neither party 'accepts' the deal - and the advisory firms loses - the Adviser (and their company) is out of a job (until they Phoenix..) AND the FSCS bascially gets 100% of probably very little - as the company will not have any assets to to pay the claim value.

Net result - clients suffer, taxation suffers (less tax) and we all suffer (see point 1).

So, if I was one of the firms involved (which I am not), and paying 50% of the claim allowed me to continue trading - I probably would take it with both hands. It's not as if, I 'won' the court case, I would get all my costs back anway.

i.e. Spend money on defending yourself and win or lose, fail as a firm - or accept the deal and continue?

As a firm, we've already paid our FSCS interim levy towards these costs. This means that these proposed settlement payments are to refund IFAs rather than investors.

As a result, I think this is a sensible and pragmatic offer from the FSCS towards those smaller IFAs who sold the Keydata schemes. I imagine that in practice it will be PI insurers rather than the IFA firms making the decision and the bulk of these settlement payments?

I'm baffled. It reminds me of the soothsayer who proclaimed: Beware of Greeks bearing gifts.

...I will turn the lights off as I leave.....

What all these huge costs indicate is that IFA's are being forced year after year to pay for the consequences of a regulator that is charged by Statute to prevent these motorway pile-ups from happening in the first place but which manifestly fails to do so.

The FSA conducted an arrow visit to KeyData as long ago as 2007, found things that were evident cause for serious concern and with that information, did...........nothing. Why not? Why isn't the FSA being held to account for having failed to fulfil its statutory duties of consumer protection? Why is the FSA allowed to share out a £30m bonus pot when it's so blatantly FAILED to do its job? Why are IFA's always being made to pick up the costs of the FSA's failures?

How Hector Sants can claim with a straight face (he left the smirking to Sheila Nicoll) that the FSA has no prejudicial agenda against small IFA's simply beggars belief.

..........and AIFA's advice is............?

I thought this was standard practice in criminal law - if you plead guilty you get half the sentence?

I'm sure the PI firms will appreciate this, it could save them a fortune.

Surely this is all wrong. If an adviser sold key data and it was the right advice at the time and remained right advice on subsequent reviews, then why should they have to pay anything? This is the same for those who did not advise on this or any other failed product, because that is what the problem is, a failed product. As if it had not failed, no one would have been encouraged to complain. Should advisers be adding an additional caveat to suitability letters to warn clients of the consequences of fraud and legislative changes that could when applied retrospectively alter the appropriateness of the advice given?

It looks very like the cases of "fishing" that those such as ACS:Law was involved with.

It's a gamble - even if you are innocent (how do you prove that when those on the other side are unnacountable in any case) then it might be worth your while settling.

Some would see this as a classic "shakedown". I am not suggesting that is the case though.

Good afternoon Charles. For the past several years I've been including just such a caveat in our letter of recommendation, not least because any providers whose products we recommend have been checked out by our network. Those that haven't passed muster, we're not permitted to recommend. Then again, if the FSA, via the FSCS, wants to absolve itself from blame by screwing you and me for the consequences of its own failures, it doesn't matter what you've put in your letters because, as we all know, the FSA is a law unto its own self.

Julian

The FSA is a child of the legislation that is as more than one judge has said was what Parliament intended.

Apologies if that is garbled, been reading too far too many bits of legislation today, is there an army of people churning out all this hogwash? It is getting worse despite the new gummint's promise to cut down and burn some quangos.

Costs of any legal action taken by FSCS to recover monies are being paid for by IFAs. If the FSCS go to court and recover less because IFA firms fail, we (the rest of the IFA industry) find ourlselves in the position of having paid legal to recover and then face FSCS levies because more fail! This is self perpetuating and to accept recovery of some monies now is probably the cheapest option for concerned?

Yes bilboo, but don't forget the swings and roundabouts syndrome.

Many of these small firms will go out of business. Ergo less to contribute to the next demand. Your share (assuming you are an open cheque book too) will be higher. The only equitable solution is for the FSCS to pursue the criminals, not the IFAs.

It is about time you all woke up and smelt the B.S that will continue just as long as you are FSA regulated. I for one am joining a E.U. regulated company and passporting back into the UK. Good-bye FSA draconian regulation hello financial advice for grownup's.

Can you tell us how to do it John?

Passporting isn't without snags. For a start, a number of UK providers (amongst them L&G, I've heard) may well decline to offer you an agency or, alternatively, they may decline to maintain an existing agency if you become regulated from a non-UK jurisdiction.

The FSA will still be be responsible for overseeing your Anti-Money Laundering procedures so, if they think you've passported out to escape the RDR, they could come along and conduct a compliance visit on that one issue and, just out of malice, make things very difficult for you. It's the sort of thing the FSA would do.

Your PII costs may be less, but you may find yourself having to pay quite a large retainer to the firm facilitating non-UK authorisation, if that's the way you choose to do it rather than going direct. The Irish regulator is pretty on the ball, whereas the Cypriot regulator reportedly doesn't have much of a clue (though, as InterAlliance found out, the Cypriot regulator isn't totally clueless either).

And if you're a member of a network, you'll have all the upheaval of disengaging from it with an uncomfortable period of zero income whilst the novation procedure is in progress. A network may also decide (you won't be given a choice) to retain a float against exposure to indemnity commission clawbacks.

Tread carefully.

I recommended one of these SLS/Keydata and earned nearly a whole £400 from award winning (at the time) Keydata.

Having also paid my FSCS levies, I'm now being offered to settle for 'just' £8,000 or so... for a sale to a millionaire as a medium risk investment when their former structured product ISA matured and needed to be re-invested in 2005 for growth (not income) option. This product was rated 9/10 by MoneyMarketing's broker review and called 'low risk' in their article at the time.

My PI won't cover me - I feel like I'm being threatened and this 'discount' offer is only likely to appeal to 'dodgier' sales I assume? Yet I don't want the hassle and exposure to legal costs that I face by fighting this grandstanding.

What to do!

@ GEM

If anyone is interested in how to escape the FSA please email me your contact details at johnphillips429@gmail.com

@ Julian

Points taken, but due diligence also carried out. It is not as onerous as you think. And, by the way, there are plenty of better companies to do business with than L&G; as well as a multitude of European companies that currently have little exposure to the UK but have just as good a track record as the usual suspects used by most IFA’s. Not forgetting the large expat market we are currently barred from advising.

@Scrapheap, if you sold it as a medium risk investment then you have alot more chance of avoiding paying than someone who recommended it as a low risk investment. I think the issue was with who the product was sold to, not how.

To John Phillips ~ I only cited L&G as an example, personally I detest the company.

One other thing ~ for trading under a different regulatory jurisdiction, you may have to effect a completely new PII policy so do not under any circumstances overlook the importance of arranging run-off cover in respect of business you've transacted to date. Without it, your current PI insurers will wash their hands of any future liabilities.

Julian - those concerns you mention about leaving the Network (lapse reserve, novations) and run off cover or backdating new PI to cover the Network-period all apply as well when leaving a network to become directly authorised with the FSA as well of course.

To Julian Stevens

Thank you for the heads up on PI, you are correct and new cover has been put in place and run-off will remain in place whilst there are any outstanding liabilities. One of the benefits of moving away from the FSA is I will not be hounded into the grave for advice I gave in good faith 20 years early. However, I don’t advise on any exotic investment vehicles or funds that continue to rear their ugly heads with more and more regularity even though, like the rest of you, I still get lumbered with the cost of compensating those who were sold them.

I have no axe to grind re Keydata I did not recommend any. What I find irritating aout the situation is that many bloggers whine about having to fund the FSCS for what they assume to be dodgy sales. 103 million disappeared from Luxembourg that was not the fault of any IFA. Until we get a trade body established which employs heavyweight lobbyists we will have to accept that we will have to fund investor losses where there is product failure and the product provider has either ceased to exist or has insufficient funds to pay adequate investor compensation. The modus operandi for the FSA will gravitate towards the weakest link in the chain which has access to either funds or insurance to pay investor compensation and I am afraid in most instances that is the IFA whether guilty or not.

I wish people would listen, an agent cannot insure what his principle is responsible for.

Anyone who has paid good money to a network for PI cover is a silly billy.

To Scrapheap - my sympathies but you can't just cave in and pay up because some 'thug in a suit' bully-boy has cocked his fist at you

To Ned K, - I did recommend both SLS and Lifemark. Why? Because in 2007 the FSA in their bulletins told us IFA's that we had a duty to diversify and invest in assets non-correlated to equities [ and yes they made specific mention to Hedge funds and UCIS ... serious mistake]

So, as a reasonable IFA I followed what looked like a reasonable proposition and did what i was asked, I diversified into second hand lfe policies amongst other asset classes

Then later that year the FSA found out that these products were dodgy, but guess what, they failed to share this knowledge. Any reasonably qualified IFA, if he had been warned at the time by the regulator that the products were dodgy would have stopped recommending the products.

This is a nightmare of the FSA's own making - but they appear not to have the courage to stand up and admit their failings - nothing new there then.

meanwhile the gravy train continues to run, and the lawyers are following the accountants into the first class carriages

Ned K

How much are you prepared to pay for a "trade body which employs heavyweight lobbyists"?

Evan £5000 pa = one pi excess that would be reasonable as a starting point. If all IFA's do that it would be well funded.

£5,000 may be a bit much Ned. Why not start with £1,000?

Times 5000 members makes £5m.

Im sure we could have the pick of policital lobbyists for that sort of money.

To Evan Owen ~ You may not understand how a network works. Yes, the network is ultimately responsible for the consequences of any successful claims against its AR companies but, in that knowledge, it ensures that its AR's must indemnify it against those consequences. Not to do so would be stupid. So we all have to have our own PII cover under a bulk network arrangement. We are given no choice in the matter and, I imagine, every other network is the same.

How can you have thought it can be any other way?

to: Green Eyed Monster

We could darn near afford Stephen Hester for that! Perhaps he could work for us part time. The FSA would never touch us then!

Julian Stevens

It is you who lacks understanding.

Tell me how it is, then.

@ Chris F

There is also a Mr T Blair, who appears to be for hire. Where better place to start than the architect!

I didn't cave in to the 50% 'offer'. It may cost me my business to fight rather than give in but I am disgusted at the threatening & sweeping assault on my integrity regardless of any care or interest in the actual facts and circumstances of my 1 recommendation in 2005.

I would love to know how many <£50k firms did settle but hope it was not many!

This 'offer' is wrong and cynical, the dodgier sales get out of jail for 50% whilst those with 'strong' case defences are pushed towards settling too due to fear of legal costs being disproportionate to the amount actually at stake.

Justice?.

Well done whoever you are who didn't cave in.

I think the current fashion is to set up a Phoenix company and park your dodgy dealings on the rest of the IFA community!