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RESPONSE TO FSA FINAL NOTICE
While significant financial penalties extending to millions of pounds have become an increasingly common feature of modern regulation, the £56,000 fine imposed by the FSA against Care Asset Management in April 2013 for failings in respect of Keydata sales was obviously disappointing
We appreciate that this may raise some concerns for individuals for whom we may be offering our services and to assist, we would comment as follows:
Many will already be familiar with the complex issues of the Keydata matter, including the misappropriation of client funds and the criticisms regarding the actions of the regulator. A number of the ongoing arguments relate to the issue of due diligence obligations for advisers and the risk assessment of the investment which are the subject of legal actions which as yet remain unresolved.
In reaching a settlement with the FSA, Care Asset Management has sought to take a pragmatic approach and we have determined that the priority for our business and our clients was to bring this matter to a conclusion.
This document has been agreed with the FSA and we believe it helps to place the matter into some context.
Following a period of investigation by the Financial Services Authority, Care Asset Management has agreed and accepted a financial penalty in respect of advice relating to Keydata products. The basis of the fine is that the firm did not accurately assess the risks posed by the product and as a result failed to ensure the suitability of its advice.
The failings of Keydata and its subsequent collapse in 2009 have had a significant impact for the regulator, for advisers, for clients and for the financial sector as a whole.
When Keydata was placed into administration, our priority was to support affected clients as far as we were able and the FSA has acknowledged in its findings that Care Asset Management voluntarily and proactively assisted clients to obtain redress from the Financial Services Compensation Scheme.
Four years on, there remain significant unanswered questions regarding the management of Keydata, not least the misappropriation of more than £100m. We very much hope these will be answered in the fullness of time.
When we initially assessed the risk of the product in 2005 we relied on a number of sources of information regarding the management of the investments from both Keydata and from independent sources. Despite assurances from Keydata that best practice was being adhered to, this subsequently appears not to have been the case. Consequently, we regret our promotion of the product on this basis and in accepting the FSAs findings we are keen to begin the process of bringing to a conclusion a matter which took place 8 years ago and represented approximately 3% of our total business at the time.
For more than 20 years, Care Asset Management has sought to achieve the highest levels of customer service and the directors and staff remain committed to this objective. We have put in place a number of measures designed to screen out product offerings such as Keydata and to improve our systems and procedures to meet the demands of the Retail Distribution Review.
As part of its investigations, the FSA has determined that Care Asset Management did not deliberately or recklessly contravene its regulatory requirements and has recognised our full co-operation which has assisted in ensuring an early resolution.
Robert A Elliot
The FSA have acknowledged Care Asset Managements efforts to assist clients in seeking reimbursement of invested funds. This was primarily via the Financial Services Compensation Scheme who called Keydata in default on the basis that their literature did not comply with FSA requirements.
Clients who were unable or unwilling to pursue the recovery of funds via the FSCS have had the option to seek redress via the FOS and these cases are being handled by our insurers on an individual basis.