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FSA rapped for unlawful use of Keydata founder’s emails
Stewart Ford, founder of the bankrupt investment firm Keydata, has won a judicial review against the Financial Services Authority.
The Financial Services Authority (FSA) unlawfully used Keydata founder Stewart Ford’s emails during its investigation of the bust investment firm, the High Court ruled today.
Ford brought the judicial review in March this year, arguing that the FSA had no right to use the information contained in the emails as it was subject to legal privilege.
Mr Justice Burnett, sitting in Plymouth Crown Court, today ruled that due to legal privilege the FSA cannot rely on the information obtained from Ford’s emails – some of which contained legal advice from Ford’s lawyers Irwin Mitchell – when building its case against the controversial Scotsman. This is the first time the FSA has lost a judicial review of one of its own investigations.
Nearly 30,000 people lost millions of pounds in savings when Keydata was shut down and declared insolvent in June 2009. Shortly after calling in the administrators, the FSA discovered that £103 million invested in underlying SLS Capital life settlement bonds had disappeared. The FSA is still investigating the scandal now.
A further hearing will be required to determine what the full implications of today’s ruling will be for the FSA’s investigation into Keydata but it is expected to represent a significant setback for the regulator.
‘I am satisfied that the claimant has established by evidence that he enjoyed joint legal advice privilege with Keydata in those two communications,' said Mr Justice Burnett.
‘It is accepted that PwC’s waiver of privilege on behalf of the company did not impact upon the claimant’s privilege. It follows that the FSA may not rely upon the content of those communications in the regulatory proceedings against Keydata or the executives,’ he added.
Neither the FSA nor the administrators it appointed, PricewaterhouseCoopers (PwC), informed Ford that his email account had been accessed or that his legal privilege had been waivered. Ford did not find out until months later when he was served the FSA’s report.
Burnett has advised the FSA to look to the Serious Fraud Office and the Police as an example of how to deal with potentially legally privileged material to ‘determine whether similar practices might be adopted’.
Harvey Knight, Ford’s solicitor and partner with law firm Withers said: ‘This episode, along with the FSA continually ignoring its own guidance and procedures in its investigation into Keydata, raises serious questions about the regulator’s own conduct. In light of this ruling, there can be no doubt that the FSA needs to take a long, hard look at its procedures and how it conducts itself’.
A spokeswoman for the FSA said: 'The judgment concerns whether or not Mr Ford could claim privilege in respect of eight documents and concludes that he could not in respect of six of them. There will be a further hearing in due course to determine remedy, which may take some time.'
For more information on the Keydata scandal and the battle over compensation you can read our article 'Keydata: when will investors get their money'.
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- Keydata: when will investors get their money?
- You can read the full judgement from Ford v the Financial Services Authority here
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