Please refer to the link on the right hand side of this page where further updates will be posted directly from the administrators, PricewaterhouseCoopers LLP.

Keydata Update

last updated 16/11/09

In my last update on the situation in respect of your Keydata investment I indicated that we were expecting news from the Financial Services Compensation Scheme in November and I am pleased to be able to report that this was made available on Friday afternoon.

Keydata has now been declared to be in default and this opens the door to claims for compensation. This falls into two categories.

ISA Tax Relief

For those investors who had been informed that the plan they believed they had placed as an ISA has failed to meet the requirements of the Inland Revenue they will now receive their returns with no tax liability.

Up until the date that Keydata was placed in administration HMRC will seek to claim tax due from Keydata.

In respect of tax liability on income after the date when Keydata went into administration the Financial Services Compensation Scheme will offer compensation to investors. They are working on an agreement with HMRC that would enable the compensation scheme to pay the tax directly to HMRC to avoid investors having to pay the tax and then reclaim it from the scheme.

Misappropriated Funds

Investors who have suffered a loss through their capital being misappropriated will now be able to apply for compensation.

The Financial Services Compensation Scheme will be writing to all affected investors within the next few weeks with guidance on how to present a claim.

This is a very positive move forward and we will, of course, continue to follow this process closely so that we can provide you with any support you need to bring the problem to a satisfactory conclusion.

 

Keydata Update

Last Updated 04/09/2009

On 8 June 2009, following intervention from the Financial Services Authority, PricewaterhouseCoopers (PwC) was appointed administrator for Keydata Investment Services Limited.  In a measure designed to protect creditors, including investors, PwC’s first action was to freeze all assets and investment plans, affecting maturities, redemptions and income payments across the range.

Initially PwC were of the opinion that an early sale of the company would be in the best interest of creditors.  However, in the course of their investigations a number of irregularities came to light, most noticeably for investor’s was the absence of assets underpinning 7 plans, namely Secure Income Bond (SIB) issues 1-3 (Growth, Income and USD plans).  The ISA eligibility of these plans was also called into question and this quickly led to a review of all investment plans.

During the meeting of creditors on 17 August 2009, attended by Birchwood on behalf of clients, PwC confirmed that the assets of SIB had been ‘misappropriated’ and concluded that there was little prospect of a significant recovery of capital for investors in these plans from Keydata.  Obviously income payments have been terminated.  PwC continue to investigate the whereabouts of SIB assets and, in consultation with the newly formed creditors’ committee, will decide the merits of any possible legal action.

The assets of all other Keydata plans have been confirmed and income payments, where applicable, are due to recommence over the coming weeks.  The ISA eligibility of all plans backed by blue chip institutions, predominantly those linked to the FTSE 100 index, has also been validated by HM Revenue & Customs (HMRC) and there will now be no need for investors in these plans to declare this income.  Growth plans and those rolling-up income will proceed to maturity as designed.

The remaining Lifemark plans, including SIB 4, Secure Income Plans 1-12 & 14 and Defined Income Plans 1-8, have been ruled non-ISA eligible.  To reiterate, plan assets have been confirmed but the tax efficient wrapper has been withdrawn.  Income payments and maturity proceeds will be paid in due course but are now declarable to HMRC.

The Financial Services Compensation Scheme (FSCS) has been closely monitoring developments but has yet to declare Keydata in default.  As such no claims can be submitted to the Scheme.  In a statement the FSCS has said, “If it emerges that Keydata has caused retail customers to suffer a financial loss for which it is liable, and it cannot meet those liabilities to investors, the FSCS may be able to help.”

 

Update from the creditors meeting of Keydata

Last Updated 26/08/2009

You will already be aware that PriceWaterhouseCoopers (PWC) arranged a meeting of potential creditors of Keydata Investment Services on Monday 17 August at the Russell Hotel in London for the purposes of approving PWC’s stated objectives for the winding-up of Keydata and establishing a creditors committee.

The meeting was well attended with approximately 150 Independent Financial Advisers, 150 Investors, a few members of the press, and some trade creditors.  We had two representatives at the meeting.  Dan Schwarzmann of PWC chaired the meeting and Mark Batten of PWC was also in attendance.  In addition PWC’s Legal Representatives, Freshfields Bruckhaus Deringer, also attended the meeting.

PWC confirmed that that all the plans had been audited and all investors assets accounted for, with the exception of issues 1 to 3 of the Secure Income Bond and a plan linked to American Real Estate (no Birchwood Clients were invested in this plan).

Detailed work is being carried out on each issue of the plans and income is being resumed (including back payments) as the audits are completed.  However this could take up to 6 more weeks to complete.

They also confirmed that capital invested in Secure Income Bond Issues 1 to 3 is missing and there is little hope of being able to recover any significant proportion of the capital for the investors in these plans from Keydata.

Many questions were raised by investors as to the possibility of recovering this capital from HSBC and Fortis who were believed to have acted as custodians for the capital but PWC were reluctant to say anything in public in case it could prejudice any possible legal action and will discuss these issues with the creditors committee, once it has been established.  A number of people stood for election to the committee but no decision on who would be selected was announced at the meeting.  It is likely that there will be 5 members of the committee with an additional 5 observers, including the Financial Services Authority and the Financial Services Compensation Scheme (FSCS).

PWC also indicated that the situation in respect of the responsibility for individual institutions is extremely complex and will take some time to clarify.

PWC will continue to examine all possible avenues of recovery as administrators under time cost considerations and they would also consider acting on behalf of investors, through the committee, for claims under the FSCS.  However the FSCS describes itself as an interested observer at this stage and it is not yet possible to register any claim, as they have not yet declared Keydata to be in default.  The implication is that they are waiting to see what can be recovered from other institutions that may have some liability.

In response to a question from the floor PWC confirmed that Keydata had got some Professional Liability insurance but, as it was limited to £5,000,000, this was not likely to be very helpful against liabilities in excess of £100,000,000.

It was indicated that new issues were emerging on a daily basis and it has been identified that up to 100 investors may not have had their money invested in the correct plan, or in any plan.  PWC will write to anyone affected, and their advisor, within the next week.

It is disappointing that we did not obtain any significant new information as to how the capital can be recovered for investments in Secure Income Bond Issues 1 to 3 but we hope it is reassuring for investors in all the other Keydata plans.

PWC confirm that all new announcements will be made through their web site and we will be monitoring this closely to ensure we can advise you on any actions you may need to take if you are affected.

I trust you find this summary of a fairly long meeting helpful and assure you that we will continue to keep you informed as the situation develops.

 

Administration of Keydata

Clients who have funds invested with Keydata should by now have received a letter from the company’s administrators, PricewaterhouseCoopers (PWC), inviting them to register as a ‘contingent creditor’ of the company, together with an invitation to attend the forthcoming creditors’ meeting.

We suggest that everyone who receives a form should complete and return it before the closing date, as failure to do so will exclude them from being included in any distribution should it be necessary to become a creditor.

This will only take place if the investigations currently being undertaken into how £100million of investors’ assets were removed from the custodian in Luxemburg concludes that the funds were misappropriated, and it is not possible to recover them from Fortis (a nationalised French and Belgian bank that acted as the custodian), and the Financial Services Compensation Scheme (FSCS) fails to compensate creditors.  At this time we believe it is likely investors should be protected by the FSCS but, while things remain unclear, it would be best to register as a potential creditor of the company in administration, as a precaution.

Although we do not believe investors are likely to achieve a great deal by attending the meeting, as it is likely to be a technical meeting authorising PWC to continue to act on behalf of the company’s creditors, we plan to send a representative in order that we can report back to all our clients holding the affected plans.

When completing the form investors will need to provide their name and address, the level of any potential loss (including any unpaid income), and the name of the investment.  It may also be helpful to enclose a copy of the original contract document. 

We are sorry that we were not able to warn our investors about receiving the package from PWC but we did not receive a copy of it until it was posted on their website late yesterday afternoon.

We will continue to keep our investors informed as the situation develops, but if anyone has any questions in the meantime, please do not hesitate to contact us.