A UK court has ruled in support of fines meted out to Stewart Ford and Mark Owen, the leading lights in the Keydata scandal.
The UK Upper Tribunal has upheld the Financial Conduct Authority’s decision to fine and ban Stewart Ford and Mark Owen, the former chief executive officer and sales director respectively of Keydata Investment Services. The tribunal ruled that both had acted without integrity and failed to deal with the regulator’s predecessor the Financial Services Authority in an open and cooperative way. The court has directed the UK Financial Conduct Authority (FCA) to fine Ford £76m and Owen £3,240,787 and agreed that they should be prohibited from performing any role in regulated financial services.
‘Keydata sold complex structured products backed by life settlements based on misleading brochures and without properly assessing whether the products could meet what was promised,’ said Mark Steward (pictured), executive director of enforcement and market oversight at the FCA, speaking at the tribunal. ‘The Tribunal found that Mr Ford bears primary responsibility for this, deliberately setting aside his regulatory responsibilities driven by his desire to maximise and preserve financial gain for himself. Those who commit such misconduct have no place in the financial services industry.’
Keydata produced and distributed structured products designed for retail consumers. In 2005, Keydata began marketing products based on bonds issued by a Luxembourg-based company called SLS Capital (SLS) and underpinned by US life settlement policies. However, the defunct distributor did so ‘without conducting adequate due diligence and using misleading brochures’. In 2006, Ford replicated the SLS structure using a company, Lifemark (Lifemark), beneficially owned by himself. As a result, over the following three years, he was able to extract fees from the structure totalling some £73.3m.
The tribunal found that these payments were received either for “no services whatsoever” or “for services unrelated to [the Lifemark] Products” and “could not be justified commercially”.
According to the tribunal, Owen received £2,540,787 in undisclosed commissions from Ford. Although both Ford and Owen claimed these payments to have been unrelated loans, the tribunal concluded that this was a “fabrication” which “in itself, both for Mr Ford and Mr Owen, displays a lack of integrity”.
Despite being made aware of various concerns about the SLS and Lifemark products, the court found a “constant theme is the deliberate and calculated concealment by Mr Ford of material information, both as to the fees extracted by Mr Ford, and as to the serious issues that arose with respect to both the SLS and Lifemark Products”.
The tribunal concluded that both Ford and Owen made false statements to the regulator in compelled interviews, had failed to instruct Keydata’s compliance officer not to mislead the regulator and had failed to disclose, in Ford’s case, his true involvement with Lifemark and, in Owen’s case, the commissions received by him.
Between 2005 and 2009 Keydata provided over £475 million of SLS and Lifemark-backed retail products. Keydata was put into administration in 2009 by the Financial Services Authority following a tax dispute over non-compliant Isas that escalated into a Serious Fraud Office investigation, later dropped, into the disappearance of client money. Declared insolvent by the FSA, which judged that Keydata did not have the resources to meet its tax liability, 30,000 UK investors were owed £450m at the time of the collapse.
Keydata’s structured products book was bought by the now-defunct Merchant Capital in 2010. Merchant Capital’s client monies were transferred to Reyker on in March 2012. Keydata marketed more than 300 structured products to UK retail investors, with an estimated sales value of £2.3bn.