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FCA fines and bans former Keydata FD

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24th Sep 2015
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The Financial Conduct Authority (FCA) have banned and fined Keydata’s former financial director Craig McNeil for failing to disclose information that may have indicated the company’s inability to pay out income to investors.

The city regulator said that the former FD had: “failed to act with due skill, care and diligence”, and “failed to understand the risks involved in actions he was taking with investors' money that helped lead the investment to fail”.

The FCA penalised McNeil £350,000 and prohibited him from performing any role of ‘significant influence’.

Ex director McNeil hit back at the decision, stating that the ban and fine was: “ill-informed, inaccurate and self-preserving” and a “stitch-up”.

Administration

Over 30,000 investors lost money in Keydata's products, which were sold through independent financial advisers and underpinned by bonds issued by Luxembourg special purpose vehicles, including SLS Capital and Lifemark.

Keydata was driven into administration by then regulator the Financial Services Authority (FSA) in 2009 after it discovering that it faced a £12m tax liability over the bonds, which were inaccurately labelled as ISAs.

Keydata’s administrators discovered that SLS had failed to make certain payments that were due to Keydata in respect of the products since early 2008 and that Keydata had instead funded £4.2m in income payments to investors from its own company resources.

This had the effect of hiding problems with SLS and the performance of its portfolio. In his role as Keydata’s FD, McNeil was aware that Keydata continued to make such payments and failed to ensure that Keydata reported the matter to the FCA, or inform the FCA himself.

McNeil 'should have understood the risks'

In a statement Georgina Philippou, acting director of enforcement and market oversight at the FCA, said: “The FCA relies on senior directors such as Mr McNeil to let us know about significant risks in their firms, especially when they have a direct bearing on customers’ investments.

“It was not reasonable in the circumstances for Mr McNeil to rely on the fact that other directors might eventually tell us what was happening. If Mr McNeil had acted, and acted quickly, concerns about SLS may have come to light sooner. Further, as Keydata’s finance director, Mr McNeil should have understood the risks of the transactions he was authorising.”

FCA 'should not be regulating financial firms'

Responding to the statement McNeil said: “Keydata covered payments to investors and advisers from its own resources during the period of the alleged SOP 4 breach. I reported this exposure on our FCA financial return in March 2009.

“The FCA ignored this disclosure because no one at the FCA looked at this financial return. The FCA’s claim that I should have rang them up and explained what was happening in words of one syllable is nonsense. If they cannot read financial figures, they should not be regulating financial firms.”

McNeil agreed to settle at an early stage of the FCA’s investigation and therefore eligible for a 30% discount. The fine would otherwise have been £500,000.

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