FSCS can't confirm level of Keydata claims

The Financial Services Compensation Scheme (FSCS) has opened up the floodgates to claims against Keydata after the firm was declared in default, but has said it is too early to put a figure on the level of claims it expects.

Loretta Minghella, chief executive of the FSCS, said, 'We are now in a position to start sending application forms to a large number of customers of Keydata who have suffered immediate financial loss.

Investors who held Keydata products in their ISAs when the investments were not suitable for the tax wrapper are likely to be eligible for compensation.

But the FSCS was less definite about on those who invested in its Secure Income Bond issues 1,2 and 3 but not through an ISA. This is despite  administrators PricewatehouseCoopers having said it believes £103 million held in the products had gone missing. Controversial businessman David Elias was the major shareholder in SLS Capital, the investment fund in which the secured income range was invested.

'These investors may still have grounds for a successful claim if it can be established that the firm caused them to suffer a financial loss, even though we have not at this stage been able to establish that the apparent loss of the underlying assets results in any liability on Keydata's part,' said the FSCS.

Products that were sold as ISA-compliant when they weren't include:

• Secure Income Bond 1,2,3
• Secure Income Bond issue 4
• Secure Income Plan issues 1 to 12 and 14
• Defined Income Plan issues 1 to 8
• Income Plan issues 1 to 12 and 14

Approximately 21,000 investors put their money into the products.

Investors that did not hold the secure income bond 1,2 and 3 in an ISA may still be entitled to compensation if it can be established that the firm caused them to suffer a financial loss.

The FSCS will send compensation forms to investors in the Secure Income Bond issues 1,2 and 3 products before the end of November.

Administrators PricewaterhouseCoopers have confirmed their is evidence to suggest that the underlying assets held in those products have been liquidtaed and may have been misappropriated.