Treasury rejects Keydata inquiry before FSA probe ends

The Treasury has ruled out launching its own independent inquiry into the collapse of Keydata until after the Financial Services Authority (FSA) has completed its review - which has so far stretched to two years without any public findings.

Ex-City minister Lord Myners, who raised the issue of a government inquiry with the Treasury, specifically asked if MPs will look into "the contribution, if any, of regulatory failures".

But commercial secretary to the treasury Lord Sassoon replied that a government probe into the FSA's role in Keydata's collapse would not be "appropriate" before the regulator reports on its review.

"The FSA is still investigating the issues surrounding Keydata Investment Services and the government feels it would not be appropriate to comment on this matter before this investigation is completed," he told Myners in a written response.

Sassoon said ministers are following the fallout of Keydata's collapse "closely" and understand it " has had serious implications for a number of people and firms".

But the government's reluctance to cross swords with the FSA leaves advisers and investors into a seemingly never ending wait for answers over who is to blame for Keydata's collapse.

The FSA put its own investigation on hold in May pending the outcome of a judicial review launched by Keydata founder Stewart Ford.

Ford claims the regulator and Big Four accountancy firm PwC conspired to unnecessarily force Keydata into administration in June 2009, and so caused the resulting financial loss to investors and the financial services industry.

On its website, the FSA states: "Our ongoing investigation into Keydata and Mr Stewart Ford is at an advanced stage of the disciplinary process but is currently being delayed as a result of judicial review proceedings brought against us by Mr Ford."

The regulator states the investigation remains a "priority", notwithstanding the decisions of the Serious Fraud Office and the Insolvency Service to discontinue their own investigations.

This month marks two years since Keydata failed and the FSA has as yet returned no public findings of its investigation.

Some of the biggest names in financial services, including Cazenove CEO Andrew Ross, Peter Hargreaves and Rathbones boss Andy Pomfret, have called for a "full and independent" inquiry into the collapse of Keydata to ensure similar failures are avoided in the future.

"I fear we will be waiting a rather long time for an independent review," Pomfret told IFAonline.

"We had a meeting with the FSA after we sent the open letter, but we didn't glean any new information from it."

"Its not just about apportioning blame, it is about avoiding the same thing happening in the future."

Asked if he thought the FSA knew how to prevent another Keydata-style personal finance disaster in future, Pomfret said: "No."

The Investment Managers Association, which this month added its voice to calls for an independent review, said the scale of recent failures has not been seen since the Barlow Clowes scandal of the 1980s.

Chairman Douglas Ferrans calculated the Financial Services Compensation Scheme (FSCS) has levied the advisory and fund management industries more than £400m in the last two years to compensate customers affected by firms' collapses.