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Lawyers acting for the FSCS have sent IFAs who recommended their clients invest in Keydata - and who the FSCS has now paid compensation - letters of claim saying the scheme will pursue the firms for recovery of the money.
Regulatory Legal Solicitors has been consulted by IFA clients who have received a letter of claim from Herbert Smith solicitors acting for the FSCS.
The letter has been sent to IFA firms where their investor clients have received payment from the FSCS in respect of Keydata claims.
It sets out the intention of the FSCS to recover payments from IFA firms.
The basic allegation is that the advice to clients was negligent and that the IFA firms should repay the FSCS.
Firms who receive the letter are being invited to enter into a "constructive dialogue" with the FSCS before it issues formal proceedings.
Protective proceedings have been issued by the FSCS for recovery of the payments.
Dexter Perrott, director of Regulatory Legal Solicitors, said: "The FSCS are clearly intending to recover monies paid out to investors.
"This will be the first mass scale recovery attempt by the FSCS. It raises points of law about the duty of care owed by advisers, which need to be clarified."
The FSCS levied the investment industry about £242m of a total £326m interim levy for Keydata compensation costs.
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Empire Builders
Couldn't agree more Harry. IFA's are not even supposed to be experts in life settlements, they followed COB Rules in force at the time which allows them to 'reasonably rely' upon the prospectus and key features provided which outlined the risks to investors. The product was listed in Luxembourg, backed by a CSSF regulated firm, issued by a FSA regulated firm, (Keydata), and clients had a discussion and documentation with risks explained. It was also backed by the FSCS and investors were paid out by US. Looking at IFA's place in the food chain it's a sick joke. We will find out who is incompetent here i'm sure. The lawyers and FSCS people have one and the same thing in common. A wish to use any opportunity possible to grab money from the weakest link in the chain. IFA's will fight back on a case by case basis, just as we did on the pensions review and the so called endowment scandal, whilst the 'fleas on fleas' lot continue to build their empires to feather their nests. How clever and commendable are their careers.
Posted by: Sage
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What sort of Bull—it is this? 1. We have ALREADY paid – how do you think the FSCS gets its money? Have they forgotten the levy? 2. How do they even know that advice was negligent? They will have to prove that. What are the rules in this respect if there hasn’t been a client complaint? It seems they are just making it up as they go along. I wonder what would happen if on receipt of such a letter the recipient was to tell the sender to ‘go forth and multiply’?
Posted by: Harry Katz