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Keydata founder handed £75m fine

Published 26/05/2015

Tom Hayes denies eight counts of conspiracy to defraud covering a period when he worked for Switzerland's UBS and America's Citigroup
Tom Hayes denies eight counts of conspiracy to defraud covering a period when he worked for Switzerland's UBS and America's Citigroup

The former boss and founder of collapsed investment firm Keydata is facing a record £75 million fine over mis-sold "death bonds" following a scandal that hit 37,000 investors.

Stewart Ford, the former chief executive of Keydata, is among three ex-senior staff of the firm to be served penalties by the Financial Conduct Authority (FCA), with former sales director Mark Owen and ex-compliance officer Peter Johnson set to be fined £4 million and £200,000 respectively.

Mr Ford's fine is the highest ever by UK financial regulators against an individual.

The FCA has also ruled they should be banned from any role in regulated financial services.

They are appealing against the FCA's decisions.

Keydata was put into administration in June 2009 and regulators said it mis-sold through financial advisers thousands of investment products which were related to life insurance policies - so-called death bonds.

The FCA said more than 37,000 customers were impacted, investing over £475 million between 2005 and 2009, with compensation payments of more than £330 million already handed out.

Customers were sold products that were marketed as eligible for individual savings account (ISA) status, but were later found not to be, according to the FCA.

Keydata collapsed after the firm found it could not pay a £12 million tax bill after the products were discovered not to be ISA eligible.

The FCA said Mr Ford and his two former colleagues "failed to act with integrity" and also alleged they misled its predecessor the Financial Services Authority (FSA) over the performance of the investment products.

It also alleges the three men continued to sell the bonds when they knew it was "highly likely" they would not be ISA eligible and that the products were "unclear, incorrect and misleading".

According to the FCA, Mr Ford and trusts set up for his family received some £72.5 million in fees and commissions on the sale of the products, while Mr Owen received commission of £2.5 million.

The FCA added: "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."

The watchdog alleged that Mr Ford "deliberately concealed the problems with the portfolio underlying these products from investors, IFAs and the then FSA".

Mr Ford, Mr Owen and Mr Johnson were not immediately available for comment.

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