The Edinburgh-based former chief executive of a collapsed investment firm, Keydata Investment Services, is facing a record £75 million fine over the mis-selling of so-called “death bonds”.
The fine would be the largest ever handed down to an individual by the City regulator but Stewart Ford – who is appealing against the decision – told The Scotsman he plans to sue the Financial Conduct Authority (FCA) and accountants PwC for £650m.
Keydata employed 140 people in Glasgow, London and Reading before it collapsed in 2009, leaving around 30,000 UK investors facing losses of £450m. About £330m has been recouped by more than 20,000 investors via the Financial Services Compensation Scheme.
Mr Ford is one of three former senior staff at Keydata to be served penalties by the FCA, which replaced the Financial Services Authority (FSA) in 2013. Mark Owen, the firm’s ex-sales director, and former compliance officer Peter Johnson are facing fines of £4m and £200,000 respectively. The watchdog has also decided to ban the three men from any role in regulated financial services.
Keydata was put into administration in June 2009 and regulators said it mis-sold, through financial advisers, thousands of investment products that were related to life insurance policies.
The products were underpinned by the firm’s investment in bonds issued by two Luxembourg-based companies, called Lifemark and SLS Capital, which in turn invested in portfolios of “death bonds” – second-hand life insurance policies that were often originally owned by elderly US citizens.
Customers in the UK were then sold products that were marketed as eligible for individual savings account (Isa) status, but were later found not to be, according to the FCA.
The regulator said: “In the FCA’s opinion Mr Ford, Mr Owen and Mr Johnson failed to act with integrity and also misled the FSA on a number of occasions in relation to the performance of the investment products.”
Publishing its decision notices yesterday, the FCA set out its view that “Mr Ford and trusts set up for the benefit of his family received some £72.4m in fees and commission on sales of the Lifemark products and that Mr Owen received commissions on sales of the Lifemark products in the amount of £2.5m”.
It 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.”
However, Mr Ford said he was seeking damages of £650m from the FCA and PwC, the accounting firm that he claims enabled the FSA to force the closure of Keydata.
“This is the authority trying to get their moment of fame but when I get them in the High Court, it will be a moment of shame,” he said.
“This is their version of events – 1,000 pages of my representations have been completely ignored. The next step is when we get to the Upper Tribunal, where it will be looked at by an objective group of people, and they will see exactly what the FSA and PwC have been up to.”
The Upper Tribunal is an independent judicial body that can hear cases where there has been a disagreement between the FCA and firms or individuals about a regulatory decision.
Mr Ford, who grew up in an Edinburgh children’s home, said: “The past six years have been a nightmare for myself, my family and the former employees of Keydata. We were tossed aside by a regulator who was hellbent on destroying a successful and well-run business in order to justify its continued existence.”
He added: “I only hope I am able to highlight what they did before its successor, the FCA, has the chance to destroy others.”
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”.
Mr Fold alleged that the regulator and PwC “collaborated and conspired to carry out a regulatory hatchet job and said he would shortly file a claim against the two for damages of £650m.
Last year, he began pursuing the City watchdog for more than £370m, claiming he was the victim of a “politically motivated” closure of his firm, which at one point had almost £3 billion of assets under management.
A spokesman for PwC said: “We have had no contact from Mr Ford, so are unable to comment on his alleged claims. We do not believe he has any grounds to bring an action.”