Business

FCA seeks £80m 'death bond' fines

FCA logo Image copyright Getty Images

Three men are facing fines of nearly £80m from the City regulator for misleading investors into buying so-called "death bonds", linked to life insurance policies.

One of them - Stewart Ford - has been given a fine of £75m, the largest such penalty ever imposed on an individual.

The Financial Conduct Authority (FCA) said the way the bonds were sold - by a company called Keydata - was "unclear, incorrect and misleading".

Some 37,000 people bought the bonds.

Mr Ford has pledged to fight the ruling in the High Court, and said he would file a claim for damages.

Investors, who bought the investments between 2005 and 2009, were incorrectly told that they were eligible for Isas.

Between them, those investors lost at least £330m, the value of the bonds involved. They are currently being refunded by the Financial Services Compensation Scheme (FSCS).

By buying the bonds, purchasers were investing in second-hand life insurance policies, which would pay out when the original owner died.

The policies were originally sold by citizens in the United States, who are allowed to cash them in.

But the FCA said the bonds were not suitable for ordinary private investors, because of the risk involved.

Tribunal

The FCA said the three men had also misled the previous City regulator, the Financial Services Authority (FSA), in relation to the performance of the investments.

Stewart Ford was the former chief executive of Keydata, which was dissolved in 2014.

The FCA said he had received £72.4m in fees and commissions on sales.

However, Mr Ford said he would contest the fine in the High Court.

He claimed that the FSA had exceeded its powers when it decided to close Keydata down.

He is now filing a £650m claim for damages against the FCA and the accountancy firm, PricewaterhouseCoopers.

"The past six years have been a nightmare for myself, my family and the former employees of Keydata," said Mr Ford.

"We were tossed aside by a regulator who was hell-bent on destroying a successful and well-run business in order to justify its continued existence."

Mark Owen, the former sales director, was fined £4m. He received commissions worth £2.5m.

Peter Johnson, the former compliance officer, was fined £200,000.

All three have been banned from working in financial services ever again.

The men have appealed against their fines, and their case will be heard at a tribunal.

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