AIFA defends actions as £58m Keydata levy row rumbles on

AIFA is reassuring members it has not given up the fight to ensure intermediaries do not foot the £58m compensation bill to cover the failure of investment ‘provider’ Keydata, following veiled criticisms about its apparent inaction.

Director general Chris Cummings says AIFA is putting “huge pressure” on the FSA to re-think its decision to levy advisers for the collapses last year of Keydata Investment Services and two stockbrokers.

The £58m interim levy, paid by advisers at the end of April, will also compensate clients of Square Mile Securities, which defaulted in February last year, and Pacific Continental Securities.

AIFA abandoned plans to challenge the FSCS levy via a judicial review earlier this month after seeking independent legal advice.

But IFA support firm SimplyBiz, while declaring its “strong” support for AIFA, said it backed a judicial review and believes it has every chance of success.

Meanwhile, law firm Regulatory Legal, which issued a judicial review of its own at Birmingham Administrative Court on 30 April with the backing of more than 200 advisers, has criticised what it deems inaction by AIFA and other lobby groups.

But Cummings says while AIFA opted against legal action, it is continuing to pursue other means of ensuring advisers are refunded the levy and is focusing its attentions on the FSA.

“We are putting a huge amount of pressure on the regulator," he says. “Discussions are taking place at the most senior level and the FSA realises this is an immense problem. This is not something that can simply be let go.”

Cummings says he feels “incredibly strongly” about what he deems a “regulatory failure” to levy the investment intermediation sub-class for the failures.

But Gareth Fatchett, partner at Regulatory Legal, says AIFA and others have not done enough.

“These people moan like mad but end up doing nothing,” he says. “They say a [judicial] review is a bad idea because they cannot be bothered to do anything themselves. The whole point about this legal challenge is nobody else will do it.”

Despite declaring his “100% support” for AIFA, SimplyBiz chairman Ken Davy this week said the levy was “wrong and should be challenged”.

“The evidence Keydata was a product provider is overwhelming and I call on the FSA and FSCS to reassess their judgements as a matter of urgency. To argue [otherwise] is like trying to say Ford should not be classed as a car manufacturer.

“I 100% support AIFA. However it is important this issue is challenged and AIFA at this present time is not minded to do so.

“AIFA has looked at it from the perspective of a judicial review against the FSCS and has seen this as likely to fail, but this doesn’t mean it would.”