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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.

FSA rapped for unlawful use of Keydata founder’s emails

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.'

You can read the full judgement from Ford v the Financial Services Authority here.

For more information on the Keydata scandal and the battle over compensation you can read our article 'Keydata: when will investors get their money'.

5 comments so far. Why not have your say?

Anonymous 1 needed this 'off the record'

Oct 11, 2011 at 18:29

I wonder if this Judgement will be upheld, should FSA appeal. Once administrators are appointed they become the company. On that basis adminstrators should be able to lift the veil of privilege if they choose to do so , in the interests of that company. The issue here must be whether or not correspondence between a Director, as an individual, and his solicitors is within the 'ownership' of the administrators. It wil be interesting to see what FSA does, but if its decision making is as illogical as its,so called independent, satellite, the FSCS then FSA might need to be concerned.

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Oct 11, 2011 at 20:17

If the FSA spent as much time, effort and money protecting the bond holders as it does its own interests, the bond holders in Keydata would not be looking at massive losses.

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richard hickman

Oct 11, 2011 at 20:32

Having been advised to invest in the Keydata product, and ignoring such advice, I am now reasured and heartened by the inability of the regulatory powers to provide a buffer for the duffer investor. Long live the legal advice of 'Buyer Beware'.

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Oct 11, 2011 at 22:19


Why should people assume that the regulator is inteligent at all? Can you count how many mistakes and downright bad decisions the FSA has made in the last two years? I can't! The costs of this latest exercise in stupidity will no doubt be loaded onto the shoulders of the IFA's and any subsequent appeal, the same. It would be a bad day for British justice if an appeal was upheld, especially after the judge has found that the FSA acted unlawfully. The interesting point that comes out of the review is that Stewart Ford's integrity is upheld, whilst the FSA's is demolished.

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Paul Nash

Oct 12, 2011 at 14:57

Any criticism of the FSA is not permitted

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