Law firm DAC Beachcroft is calling on advisers who are being pursued by the Financial Services Compensation Scheme (FSCS) for Keydata recoveries to consider launching a group action to challenge the FSCS.
Law firm Herbert Smith wrote to advisers on behalf of the FSCS in October and again last week to start the legal process of recovering compensation paid to Keydata investors. The FSCS has so far accepted 5,200 claims from Keydata secure income bond investors and paid out £67m relating to those claims.
The particulars of the claim sent by Herbert Smith last week, seen by Money Marketing, Fundweb’s sister publication, says the Keydata product literature was misleading and the risks were unclear. The FSCS argues this should have been apparent to IFAs.
DAC Beachcroft partner Daniel Preddy says: “In reaching its decision to pay compensation to Keydata investors, the FSCS made determinations and concessions which are fundamentally inconsistent with the recovery claim it is now bringing against IFAs.”
He says by acting collectively to challenge the claims, IFAs can pool costs and act from a stronger negotiating position.
Preddy says that under a group action, advisers could develop “crucial generic defences against claims in relation to causation and foreseeability”, as well as the suitability of the Keydata products.
An FSCS spokesman says: “The FSCS pursues recoveries whenever practical and cost-effective to do so. We believe claims may exist against IFAs for compensation costs relating to certain Keydata products. We cannot comment further at this stage.”