FSA slams Keydata founder in court battle

The Financial Services Authority (FSA) has warned of a liquidity gap at the heart of Keydata’s Defined Income Plans and accused the firm’s founder Stewart Ford of trying to mislead its investigators over £4 million paid to him by the business, court documents reveal.

The regulator was taken to court last July by Swiss-based Ford in a bid to prevent it from accessing computer files with information on Keydata.

New Model Adviser® has obtained the witness statement from FSA enforcement team lawyer Rachel Irving in which she revealed Lifemark, in which the Defined Income Plans invested, could face liquidity problems between 2012 and 2013.

The problem uncovered by the FSA is that the underlying US policyholders with the life settlement contracts held by Lifemark were not dying fast enough.

Although Lifemark’s $1.3 billion of life settlement assets are ultimately thought to be sufficient to meet its obligations, the 23,000 investors with £350 million in Lifemark could face delays in payouts in 2012-13.

Ford, Keydata managing director and Lifemark director, planned to bridge the liquidity gap by taking money from new Lifemark customers and using it to pay existing investors.

In her statement Irving said: ‘This predicted liquidity gap and Lifemark’s proposal for dealing with it indicate a real risk of problems at Lifemark.’

The Lifemark bonds which underpin Keydata customers’ investments are managed by a Luxembourg-based company called Tandem Partners Sarl. ‘Lifemark is not making any comment at this time,’ said Colm Smith, director of Lifemark and Tandem.

According to Irving’s statement Ford claimed to have been employed as a ‘consultant’ by Tandem receiving £904,500 between 2007 and 2009. The FSA was shocked to learn from PricewaterhouseCoopers, Keydata’s administrator, that the 46-year-old had actually been paid £4.2 million.

‘In some instances it appears that Mr Ford has actively attempted to mislead the investigation team, at the very least,’ said Irving in her statement. ‘The investigations team’s view is that he has…failed to both act with integrity and co-operate with the FSA.’