Entrepreneur seeks £370m in damages from FCA

A FINANCIAL services entrepreneur is pursuing the City watchdog for more than £370 million in damages after claiming he was the victim of a “politically motivated” closure of his firm.

Martin Wheatley, chief executive of the FCA. Picture: PA

Stewart Ford, who is the subject of disciplinary proceedings from the Financial Conduct Authority (FCA), said he has suffered “grievous and irreparable” harm to his reputation through the actions of the FCA’s predecessor, the Financial Services Authority (FSA), which led to Keydata Investment Services being placed in administration more than five years ago.

He told Scotland on Sunday that the firm had almost £3 billion of assets under management and was a “highly successful” business before the FSA became involved amid a probe into the tax treatment of certain investment funds issued by two Luxembourg-based companies, SLS Capital and Lifemark.

Ford, who grew up in an Edinburgh children’s home, said: “The FSA wanted to make something of this and started interfering with our relationship with HM Revenue & Customs, because post-2008 they wanted to demonstrate how tough they were.”

The FSA, which was abolished last year and replaced by the FCA and Prudential Regulation Authority, came under heavy criticism from MPs over its handling of the lending boom-and-bust that led to the taxpayer bailouts of HBOS and Royal Bank of Scotland.

Ford said: “They’ve completely ruined my reputation and I’m fighting back.”

Keydata employed about 140 people in Glasgow, London and Reading before it collapsed in 2009, leaving 30,000 UK investors facing losses of £450m. The latest annual report from the Financial Services Compensation Scheme (FSCS), which is the UK’s statutory fund of last resort for customers of financial services firms, shows it has paid compensation of £330m to more than 20,000 investors who had suffered losses on structured products marketed and distributed by Keydata.

The FSCS report, published last month, adds: “We have continued actively to pursue recoveries relating to the failure of Keydata for some years through a number of different avenues. The primary avenue for recoveries has been the litigation we are pursuing against a large number of IFA firms in connection with their selling of Keydata-related products, SLS and Lifemark.”

Last year, the FCA fined investment firm Sesame £6m for selling Keydata life settlement products to customers without spelling out the risks.

Ford handed a letter to the FCA on Monday, in which he sets out his claim for £350m in damages plus £21m of interest.

His letter states: “The FSA’s actions were politically motivated and were not in pursuance of the statutory objectives of the Financial Services & Markets Act.”

It continues: “In the circumstances, the FCA and the individual members of the investigation team are liable to me and the Ford Family Trusts for damages flowing from the misfeasance in public office exhibited by the FSA and the investigation team.”

The Serious Fraud Office began investigating Keydata in 2009 following a referral from the FSA after it emerged more than £100m of assets held by SLS had been “misappropriated”. The probe was later dropped after the agency found “insufficient evidence to secure a prosecution”.

A spokesman for the FCA said the regulator’s disciplinary proceedings against Ford were continuing “and under these circumstances it is inappropriate to comment”.