The FCA has today published Decision Notices in respect of three former members of Keydata’s senior management: Stewart Ford (former chief executive), Mark Owen (former sales director) and Peter Johnson (former compliance officer).
All three individuals have referred their Decision Notices to the Upper Tribunal (the Tribunal) where they and the FCA will each present their case. The Tribunal will then determine the appropriate action for the FCA to take. The Tribunal may uphold, vary or cancel the FCA’s decisions. In the case of the decision to impose a penalty, the Tribunal will determine what (if any) is the appropriate action for the FCA to take, and remit the matter to the FCA with such directions as the Tribunal considers appropriate for giving effect to its determination. In the case of the decision to impose a prohibition order, the Tribunal will determine whether to dismiss the reference or remit it to the FCA with a direction to reconsider and reach a decision in accordance with the findings of the Tribunal. The Tribunal’s decision will be made public on its website.
The Decision Notices, which reflect the FCA’s view of what occurred and how the behaviour is to be characterised, set out that the FCA has decided to fine Mr Ford, Mr Owen and Mr Johnson £75 million, £4 million and £200,000 respectively and to prohibit all three from performing any role in regulated financial services.
In the FCA’s view, Keydata Investment Services (Keydata) designed and sold investment products to retail investors via IFAs. The products were underpinned by Keydata’s investment in bonds issued by Luxembourg special purpose vehicles called SLS Capital S.A (SLS) and Lifemark S.A (Lifemark). In turn SLS and Lifemark invested in portfolios of life settlement policies. The products were sold as eligible for ISA status, but they were not, in fact, eligible.
In the FCA’s opinion Mr Ford, Mr Owen and Mr Johnson failed to act with integrity and also misled the then Financial Services Authority (FSA) on a number of occasions in relation to the performance of the investment products.
The Decision Notices set out the FCA’s view that the three individuals permitted Keydata to continue to sell the Lifemark-backed products to retail investors when the individuals were aware that it was highly likely the products did not comply with the ISA regulations, that the financial promotions were unclear, incorrect and misleading, that the due diligence on the products was inadequate and that there were problems with the performance of the portfolio ultimately underlying the products.
Further, the Decision Notices set out the FCA’s view that Mr Ford and trusts set up for the benefit of his family received some £72.4 million in fees and commissions on sales of the Lifemark products and that Mr Owen received commissions on sales of the Lifemark products in the amount of £2.5 million. In the FCA’s opinion, Mr Owen’s commissions were not properly disclosed, nor was Mr Ford’s conflict arising from the payment of these fees and commissions adequately managed.
In the view of the FCA, with regard to the SLS-backed products, Mr Ford deliberately concealed the problems with the portfolio underlying these products from investors, IFAs and the then FSA. It is the FCA’s view that Mr Owen recklessly relied on assurances from Mr Ford that he would resolve the problems with the portfolio’s performance and solvency and agreed to Keydata funding the income payments to investors (which should have been funded by payments from SLS to Keydata) from Keydata’s own resources although he was aware this would conceal the portfolio’s solvency problems.
The FCA further considers that the individuals deliberately misled the FCA by making false representations to the FCA in compelled interviews about the performance of the investment products, having failed to disclose to the FCA problems with the SLS portfolio which impacted on the SLS products’ performance. Further, the FCA considers that Mr Johnson failed to ensure the FCA was aware of problems with the products and their financial promotions, identified by Keydata’s professional advisers and that Mr Ford and Mr Owen failed to disclose to the FCA the significant personal benefits and commissions they received from the sale of the Lifemark products, when they were aware of the FCA’s concerns around their involvement in Lifemark and the commissions they received.
Mr Ford, Mr Johnson and Mr Owen applied unsuccessfully to the Tribunal for an order preventing the FCA from publishing their Decision Notices.
Notes to editors
- The Decision Notice for Stewart Ford[1].
- The Decision Notice for Mark Owen[2].
- The Decision Notice for Peter Johnson[3].
- The Tribunal’s decision dated 2 May 2015 dismissing Mr Ford’s, Mr Johnson’s and Mr Owen’s applications to restrain the FCA’s publication of their Decision Notices can be found on the Tribunal’s website[4].
- Between 2005 and 2009 Keydata Investment Services (Keydata) provided over £475 million of SLS and Lifemark-backed retail products. In June 2009, Keydata was placed into administration on the FCA’s application, on the basis that Keydata was insolvent. Keydata was dissolved on 2 July 2014.
- In December 2014, the FCA published a factsheet[5] explaining what traded life policy investments (also referred to as “life settlement policies”) are and the marketing restriction rules applying to their distribution to retail investors in the UK. The paper confirmed that firms should not promote traded life policy investments to ordinary retail clients.
- In April 2010, the Financial Services Act 2010 amended section 391 of FSMA giving the FCA the power to publish decision notices. This power became active in October 2010.
- The FCA’s approach to publishing decision notices was explained in Policy Statement 11/3[6] published in January 2011.
- On the 1 April 2013 the Financial Conduct Authority (FCA) became responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA).
- The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has three operational objectives: to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers.
- You can find more information about the FCA[7], as well as how it is different to the PRA[8].