Stewart Ford, founder and chief executive of Keydata Investment Services, has been slapped a record fine of £75 million by the FCA, while Mark Owen, the company’s former sales director, racked up £4 million in penalties, and Peter Johnson, former compliance officer, will have to pay up £200,000 for their roles in selling “death bonds,” which cost investors millions amid the collapse of the firm.
Death bonds are high-risk trade investments and are created from an underlying pool of assets, where the individual risks associated with one policy are evenly dispersed, making it a stable investment. These bonds are dependent on the death of an insurance holder.
According to the British regulator, Keydata designed and sold investment products to retail investors through independent financial advisers. The products were “underpinned by Keydata’s investment in bonds issued by Luxembourg special purpose vehicles called SLS Capital S.A. (SLS) and Lifemark S.A.,” the FCA said. In effect, SLS and Lifemark invested in portfolios of life settlement policies and the products were packaged and sold as eligible for individual savings account (ISA) status but “were not, in fact eligible.”
Ford, Owen, and Johnson “failed to act with integrity and also misled the then-Financial Services Authority (FSA) on a number of occasions in relation to the performance of the investment products,” the FCA said.
The three allowed Keydata to sell the Lifemark-backed products to retail investors, despite knowing that the products did not comply with ISA regulations and that the financial promotions around the packages were “unclear, incorrect, and misleading” the FCA added.
Ford knowingly concealed the issues from investors and Owen recklessly relied on Ford, who assured Owen that he would rectify the problems associated with the portfolio’s performance and solvency. Moreover, Johnson “failed to ensure the FCA was aware of problems with the products and their financial promotions,” the FCA noted.