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FSCS Keydata legal costs swell to £20m

by Daniel Grote on Jan 28, 2013 at 07:12

FSCS Keydata legal costs swell to £20m

Costs incurred by the Financial Services Compensation Scheme (FSCS) in recovering payouts related to Keydata investments are set to rise to up to £20.2 million, according to a Financial Services Authority (FSA) consultation on FSCS management expenses.

The FSA is consulting on FSCS management expenses of £74.4 million for 2013/14, including a budget of £7.2 million for ‘legal and other professional expenses to pursue recoveries, including in respect of Keydata’. That provision comes on top of £7.7 million of recovery costs in 2012/13, largely due to Keydata, and £5.3 million in 2011/12.

Since paying out nearly £300 million in compensation to Keydata investors, the FSCS has been attempting to recoup those costs, launching legal action against advisers which sold the investments. Its largest recovery to date remains the £28 million received from Norwich & Peterborough Building Society, the biggest seller of Keydata investments.

The proposed budget of £74.4 million FSCS management expenses represents a 10% increase on the £67.4 million forecast to be spent during 2012/13.

6 comments so far. Why not have your say?

Andrew IFA

Jan 28, 2013 at 08:33

Product levy please, based on the risk of the investment would not be a bad idea.

It is disgusting how these people spend others money, product levy paid by all investing clients should resolve this funding issue once and for all

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Jan 28, 2013 at 10:23

Colluding with the FSA to rewrite history so that it could make claims against hundreds of IFA firms over thousands of individual cases was always going to be a risky and expensive business for the FSCS.

When all of these individual cases do finally get to court and the FSCS loses most of them (as is looking increasingly likely), will any heads roll?

No, I thought not.

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Mike Morley

Jan 28, 2013 at 10:43

FSA to FSCS "Oops loooks like we goofed here, better pay out compensation to all and sundry even if they don't think they were missold that'll keep us our cushy jobs and put things off till Hector's got his knighthood and his sinecure at Barclays".

FSCS to FSA "Good grief this has cost us a fortune!"

FSA to FSCS "Well go after the advisers who recommended these funds we'll get the dosh back off them"

FSCS to FSA "Oops!

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Simon Kershaw

Jan 28, 2013 at 11:10

The cost of receiving payment from Norwich and Peterborough was zero. The FSCS screwed the IFA market for more than its due by adding "additional running costs" to the sub-group on top of the extraordinary levy, not once but twice.

The FSCS is a last resort fund, to be used when all other options have failed. With Keydata it has paid out first and not asked questions afterwards.

What an expensive sham.

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James Clancy

Jan 28, 2013 at 12:30

Could someone please answer me a simple question

Why have the non executive directors on the FSA board why have they not questioned these legal costs.

What does Amanda Davidson Considering she is an practising professional and a non executive director surely she should be putting forward our the concerns of the advisor community since her election in May 2010.

Amanda for all the PIA did have many faults ,but one of the benefits was that it did had practitioners on the board ( after all you were a PIA board member ) who were not afraid to discuss the concerns of the adviser community and help to influence policy.

The why FSA quite deservedly has its reputation for being dictatorial for not having practitioner from all sectors of the industry. Having board representation may have prevented some of the scandals and the bad regulation we have had over seen over the last decade

Hopefully and there is still time Martin Wheatley and Parliament to amend the situation before the FCA become alive in April 2013.

Considering that the industry pays for regulation business around time to reconsider board representation. Quite often we hear politicians talk about stakeholders representation and corporate governance in any organisation. Why cannot they apply the same to the regulators?

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Richard Butler

Feb 02, 2013 at 08:24

All I know is that I am going to have to pay even more to fund compensation and greedy lawyers' bills for products I didn't sell. I tackled the FSA on this and you can guess the reply I got. Mind you, the lady in question has since joined the queue to jump ship so probably wasn't giving my gripe full attention. I think I might have to increase the initial charge on investments to 10% - how's that for a product levy?

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