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Stewart Ford, the former Keydata director whose firm’s collapse drove the FSCS interim levy to the highest on record, has denied responsibility for the £326m fee and claimed advisers are a scapegoat for the FSA’s mistakes.
Speaking to Professional Adviser, Ford also called for the levy to become a loan to save Keydata backer Lifemark’s assets from a liquidation firesale. This could provide a lifeline for intermediaries and give clients a chance of being repaid when the portfolio matures, according to Ford.
“Keydata’s insolvency was manufactured by the regulator and aided and abetted by PwC. Now, two years later IFAs and fund managers are being asked to stump up a lot of money to pay levies that are absolutely ridiculous,” he said.
However, both Lifemark’s provisional administrator, KPMG’s Eric Collard, and life settlement veteran Yves Fouarge have expressed serious doubts about the management and value of the fund’s underlying assets of about 300 second-hand life polices.
Their main concern is whether the portfolio, which must pay out $4.5m each month just to avoid the policies defaulting, will be able to stave off liquidation for good.
Ford, who said he will not step forward to rescue Lifemark, admitted that the vehicle is in trouble because no one knows when the original policyholders will die and pay the maturity value of their policies into the fund.
“Three polices matured last month, there may be three policies maturing this month, you just don’t know,” he said.
In a shocking admission, Ford said Lifemark-backed Keydata bonds were sold on a portfolio that was only “three-quarters” of the way built up, despite investors believing they were buying a complete, fully costed working portfolio.
“You continue to build a portfolio. If somebody stops when you are three-quarters of the way through building up your asset pool, you are going to run into problems.”
The FSA closed Keydata down in 2009, when it found some of its ISA products were not eligible for that status, causing a £5m tax liability which it said the firm could not pay. It claimed Keydata’s management did not oppose the firm’s administration.
But Ford, who denies the FSA’s version, said it took action only because junior FSA staff wanted to show the regulator was “tough” following a series of banking and investment failures.
“The Lifemark portfolio will mature. If all those who have paid levies now step into the shoes of investors and take over Lifemark, then there would be assets for them to be repaid, probably in full,” he claimed.
Many IFAs are facing claims that they mis-sold Keydata products, because they were too risky for clients with anything but a high attitude to risk.
But Ford refused to answer where he thought Keydata Secure Income Bonds and Secure Income Plans sat on a risk scale. He said: “That’s for the intermediary to determine. Every product has risks. How risky it is depends on a number of factors.
There are so many different variables that affect whether or not the product was at risk, or if it was going to deliver or whatever. Go to the brochure, it’ll tell you what the risks are.”
The FSCS has agreed to pay out compensation on Keydata products because of misrepresentations in the marketing brochures used to promote them.
But Ford is defiant: “This whole thing is based on fear. I’m not scared of the FSA. In the fullness of time there are things happening that will become apparent. The FSA has pulled a tiger’s tail with me. It has really done the wrong thing. I will prove it.”
No one has been charged with any wrongdoing or struck off by the FSA since Keydata was placed into administration more than three years ago.
Former Keydata director Stewart Ford has hit out at Norwich & Peterborough (N&P) Building Society over its mis-selling of his company’s products. In an exclusive interview with Professional Adviser, Ford accused N&P of being “commission hungry”.
“I remember the N&P deal. It seemed clear to me they were commission hungry. I believe they received 4% commission. They were chasing something much greater than that.”
N&P joined forces with US hedge fund CarVal in October 2010 to provide £1.5m and $7.5m in loans for Lifemark.
Ford, who maintains that he was prevented from helping rescue Lifemark by the FSA, said: “If N&P was the acceptable face of a rescue plan, given what I've read and heard about how they sold this, that is just a bit rich really, isn't it.”
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Who do you believe least?
Trouble is no-one can give any credibility to neither Ford nor the FSA. The FSA has frequently been shown to be deceitful in its pronouncements on other matters (e.g. its latest 'spin' on FOS claims statistics) and everyone should be suspicious of Ford. Meanwhile PwC earns a shed load of fees working for the FSA and the State - are they likely to criticise the FSA? My personal view is that markets work and bureaucracies don't. The FSA sticks its fingers in things it cannot ever understand and messes them up, viz the banks. Its actions almost certainly made worse a difficult situation for keydata, which may well have been worked through. Now though, we will never know. More FSA failure.
Posted by: Steven Farrall
Picking up the tab....
All very well and good Mr Ford, but all I know in this sorry saga is that my firm has never put one penny of our cients cash into any of your rather dubiously-structured products (we've used structured products, but definitely not yours); yet we're going to have to pick up the tab, along with many other advisers in exactly the same position. But are we disheartened? You bet we are! Other words spring to mind but (quite rightly) they won't get printed if I use them. But I don't have time to waste here. I now need to work a lot harder to find the 'however many' thousands of pounds I'm eventually going to have to cough up to pay for your mistakes.
Posted by: Paul Harris
PICKING UP WHAT?
Some expert you are 'Picking up the tab'. Get the story straight, the 'saga' as you see it is exactly what the FSA wants you to see - not the truth, not even near the truth. It was the mis-handling of the Keydata affair by the FSA dumbclucks that brought about the situation you now find yourself in, plus the massive payments to their cohorts in PwC. If the so-called regulator had done it's job, Keydata could have been saved and the Lifemark fiasco prevented. Plus, if you are so disheartened, perhaps you will join the call to create a fighting fund to represent IFA's and help control the controllers, namely the FSA, PwC and possibly the Government.
Posted by: norman Flight
Innocent until proved......
I am over the initial disbelief and anger stage of this sorry affair. I remain a little sceptical on all parties, FSA, Ford and PWC. However Mr Ford has both the time and money and hopefully pride to uncover and disclose any contributory wrong doings other than that which points to himself at present.
Posted by: Richard Arnold
Credibility and questions.
Steven, you have almost hit the nail on the head with a perfect characterization of the totally dis-credited FSA and a reasonable call on the fee gatherers, otherwise known as PwC who are also under a major investigation for conflict of interests in this scandal. I'm not so sure about your take on Stewart Ford though. Keydata was by any measure, prior to the regulators disastrous intervention, a company performing to clients expectations on almost every front. This can be seen in various tables that show how well their products were performing so I make no apologies for more than leaning towards the line that Stewart Ford has been shouting about re the regulatory stitch up and the FSCS decision surely backs this line of thinking up. Everyone has been terrified to speak up against the FSA in the past, that is pretty obvious. As long as it wasn't them being led round the back for a bullet in the back of the head, everyone kept their heads down. Ford has clearly not taken his FSA prescribed medicine and is fighting them. So Stephen, are we right to be suspicious of him? Maybe some would yes, the Harry Katz of the world clearly are but then he has made up his mind already and the FSA must love his every word, that tells me more about that line of thinking than anything else. This story will clearly run and run and I think there is more to Mr Fords line than many have cared to think about and these horrific levies have finally got people asking how on earth have we really got to this position.
Posted by: David Pearl
Who do you believe?
At the moment, it doesn't really make any difference as no evidence which would stand up in court has been presented in front of 10 goodmen/ladies for them to reach a conclusion. It is terrible to have to say it, but the disengenous statements as Steve Farrell has said and the nearest to be proven to date appear to come from the F-pack. That does not mean I believe Mr Ford, but without evidence of actual lies (the FSA's are statistics presented in a way to suit their agenda, not lies, who should anyone believe?
Posted by: Phil Castle
IFAs
To Paul Harris, who states " we used structured products, definately not yours Mr Ford"... Well why didnt you use Keydata's structured products??, Every one of their structured products has products performed really well and paid out during the worst financial crisis on record..Lifemark was not a structured product , so dont embarass yourself anymore , it best to keep quiet and let people think you are stupid, than open it and remove all doubt, and tar the reputation of all advisers. In fact they were one of the only providers who didnt use lehman as a counterparty, as it was considered too low grade .Please get your facts right. Just get this case to court , in a public forum, and we will all see the truth, and then we can all decide who is right. The FSA cant hide anymore..what a shambles they are
Posted by: Jack Johnson
Unpopular I know..
Unpopular as it maybe, as an IFA having to pay this levy, Im actually glad to see that someone has finally stood up to the FSA, and hopefully will continue this fight , as I and many of my counterparts are tired of constantly paying levys, with no explanation of why these investments have failed, and how they didnt catch it in time. And I agree with y , Im on here anonymously as Im afraid of the backlash of publicly condemning the FSA, as I know it will probably make my life difficult. If Ford has a case , he should be heard , in a court.Just to put an end to this debacle if nothing else
Posted by: Anonymous
Interesting
There are some very interesting comments in that article. Someone, somwhere in some corporate or public body has decided that the Lifemark portfolio is worth zero. How can this be when it has had some recent maturities? It was on this basis that the FSCS came to their decision. I, for one, would like to know how they came to the conclusion that the portfolio had no value, as it seems flawed to me. Does anyone know if a Freedom of Information request can be made to challenge this? Have the fscs arranged some sort of interest in the portfolio so that there can be a repayment of the levy or is the portfolio just going to be allowed to wither on the vine?
Posted by: Onlooker
LIES or simply UNTRUTHS
Jack Johnson has actually pinpointed the real problem with issues regarding the FSA and PwC. We can no longer believe what they are telling us. Therefore, as a citizens of a democratic system we should have the right to the highest form of jurisdiction. The FSA should be impeached (if that is the right term) and held to account for it's past decisions, not only regarding Keydata, but many others as well. How this can be done is problematical because now we don't know how deeply involved the higher echelons of the system are, or if the present government is using, or mis-using, it's powers to control and silence protestations (the old pals act). If it were possible to get the FSA into court and force them to explain their quite unreasonable decisions, then perhaps the industry could be re-established on a much more solid foundation. Trust in the people who are in control, or who regulate, is fundamental, mis-trust is detrimental. Jack is right, get them all into a court of law where anything said is under oath and can be chastised if found to be lies then perhaps all of this shambles can be sorted out for now and for the future.
Posted by: norman Flight
Unbelievable!
So Mr Ford can't comment on the risk scale of the SECURE Income Bonds and SECURE Income Plans? Surely the clue is in the use of the word - SECURE? According to my Dictionary, the word SECURE is defined as Certain, Fixed, Safe and Sure! How could anyone ever associate the word Secure, with High Risk? Obviously, SECURE has a completely different definition in Switzerland?
Posted by: Paul Nash
The meaning of secure
Mr Nash, no matter where you reside, secure only means secure if the regulator doesn't close down an entire business over night. That should make everyone, even you, feel very insecure.
Posted by: David Pearl
Secure
Mr Pearl, I don't recall the regulator stealing £103 million? Why were the Directors of Keydata dealing with a known fugitive and dealer in pornography? Not a very secure way of managing your client's investments?
Posted by: Paul Nash
Levies....
Lots of bleating about levies.............also paid by those who recommended the schemes. I thought IFA's were in this together, so this is no time to gloat, it may be your turn next! Are retired advisers who gave a lifetime of advice without complaint to be hounded and have their lives ruined by fraud, an incompetent regulator, a greedy buch of lawyers, and because they relied in good faith upon an authoritatively produced Prospectus which has been deemed as misleading? They are but you in a future guise. Who and what is going to save them? Does anybody even care?
Posted by: Sage
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what about the undisclosed 10%?
Stewart Ford seems to have forgotten that he took an undisclosed (not in the brochure or the Luxembourg listing documents) 10% upfront charge from the Lifemark fund which accounted to £38 million - this money went to a trust located in the British Virgin Islands. That's the misrepresentation that the FSCS is paying out for since the brochure claimed 100% asset allocation, not 90%.
Posted by: Bored with Ford