Keydata income payments suspended
PricewaterhouseCoopers (PwC) has suspended income payments and banned early redemptions on some of insolvent firm Keydata’s products.
The administrator has also been unable to sell the company, despite claiming it would be sold and "everything would go back to normal" by 19 June.
The FSA is now working with PwC and also the Serious Fraud Office to reach a solution for investors, and to uncover ‘potentially missing assets’.
The FSA has labelled the situation "complex" after PwC’s forensic examination of Keydata’s accounts revealed that income payments and early redemptions had been dealt with irregularly, and that assets may have been liquidated and misappropriated.
This all spells bad news for some Keydata investors. Secure Income 1, 2 and 3, and Income Property Bond 1-6 have had income payments and redemptions put on hold by PwC.
Investors in Secure Income Bond 4, Secure Income Plan 1-12 & 14 and Defined Income Plan 1-8, Special Editions and some Lifemark branded products (for a full list of affected Lifemark products, see the PwC website) will continue to receive income payments, but redemptions have been banned.
PwC is now looking to sell the business and is in talks with "interested parties".
Dan Schwarzmann, joint administrator and partner of PwC, says it is disappointing the business has not been sold yet as this would have provided some much needed stability for investors, employees and creditors.
He adds: "I reiterate my earlier confirmation regarding funds held by Keydata. The funds, which totalled £70 million at the date of our appointment, are all held in secure segregated client bank accounts and are not affected by the insolvency of KIS."
Concerned investors should visit the PwC website for up-to-date information, or call the helpline on 020 7804 4424.
Structured products offer returns based on the performance of underlying investments. Many products are linked to a stockmarket index such as the FTSE 100 or a “basket” of shares. There are generally two types of product, one offers income, the other growth and investors have to commit their capital for the prescribed term, usually three or five years. The investment is not guaranteed and if the index or basket of shares does not perform as expected over the term the investor might not get back all their capital.
Generally speaking, insolvency is to businesses what bankruptcy is to individuals. A company is insolvent if the value of its assets is less than the amount of its liabilities, or it is unable to pay its liabilities (loan payments) as they fall due. It’s an offence for an insolvent company to keep trading, so the main options available to an insolvent company are: voluntary liquidation, compulsory liquidation, administration or a company voluntary arrangement.
The Financial Services Authority is an independent non-governmental body, given a wide range of rule-making, investigatory and enforcement powers in order to meet its four statutory objectives: market confidence (maintaining confidence in the UK financial system), financial stability, consumer protection and the reduction of financial crime. The FSA receives no government funding and is funded entirely by the firms it regulates, but is accountable to the Treasury and, ultimately, parliament.