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Nineteen thousand consumers to benefit from the work of forensic accountants

Member: Nifa

The Financial Services Compensation Scheme have announced that around nineteen thousand consumers, who lost money in the collapse of investment bond company Keydata, are to set to receive compensation, although the details have yet to be published.

The FSCS as it’s known said that its investigation, led by a team of forensic accountancy specialists, had revealed that marketing material used by the company to promote Lifemark bonds did not comply with the requirements of the Financial Services Authority.

This legal breach, say the FSCS, means that there is a liability to consumers who lost money because of the problems at Keydata.

Luxembourg-based Lifemark is in provisional administration, but the administrator is considering proposals to restructure the group.

The FSCS said there was still uncertainty about the restructuring and what the implications would be for investors.

As a result it is not known how much individual Lifemark bonds are worth, and how much each investor has lost.

Lifemark is not covered by the FSCS because it is based in Luxembourg, but the FSCS will be paying out compensation to eligible UK investors who bought bonds through Keydata, if it finds the group has a liability to them.

Keydata was put into administration in June last year, which is why the FSCS has stepped in to pay redress. The group is being investigated by the Serious Fraud Office.

This announcement affects people with Lifemark Defined Income Plans issues one to eight, Income Plans issues one to 14, Secure Income Bonds issue four, and Secure Income Plans one to 14.

The FSCS said it would send application forms to these people during October, and would assess claims once it received the forms back, so that it could begin compensating investors once the restructuring position of Lifemark was clearer.

It hopes to provide a further update on the calculation and payment of compensation shortly.

People who have an eligible claim will receive 100% of the first £30,000 they lost, and 90% of the next £20,000, giving a maximum of £48,000.

Investors affected by this announcement are the final group of people to learn whether they will be eligible for compensation following the collapse of Keydata.

The FSCS has already paid out £54.8 million to people with Keydata investments after reviewing nearly 5,000 cases. It is paying compensation in 90% of cases.

Other categories of investors who will receive redress include those who took out Secure Income Bonds with Keydata, who will be compensated up to the FSCS limits .

There are also people who bought investments through the firm which were wrongly sold as ISAs and were backed by Lifemark, but did not have the tax-free status.

The FSCS say they will only cover any tax liability investors with these products have as they are not thought to have lost any capital.

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