IMA calls for Keydata review

The IMA has called for an independent review into recent investment failures, including the fall of Keydata.

"In the last three years the failure of investment firms has led to a total compensation bill approaching £500m," said Douglas Ferrans, the industry body's chairman. "The scale...cannot be ignored."

Ferrans said lessons must be learned from the fall of Keydata Investment Services and Pacific Continental, among others, and that the failures ought to be the subject of an independent review by the Government’s rebranded consumer-protection watchdog, the Financial Conduct Authority.

Ferrans called the surprise £230m bill the Financial Services Compensation Scheme (FSCS) presented to fund managers, as part of the £326m FSCS level in 2010/11, the "biggest event to hit the UK asset management industry over the last year".

"The liability was largely the apparent failure of a small structured product provider which had been promoting bonds issued in Luxembourg backed by a life-settlement portfolio. This had nothing to do with the fund management industry, but the impact was on us," he added.

Ferrans also said the FSCS bill could have a detrimental impact on UK competitiveness.

"Time and again when firms are asked what they need from the regulatory and business environment the answer comes back 'stability'."

He emphasised the importance of stability in ensuring that a firm can plan with the confidence that it will not be derailed by a regulator or Government-induced events.

"An unexpected bill for £230m arriving out of left-field comprehensively fails that test. Our regulators and legislators should be in no doubt about the impact that this episode has had, not just in the UK, but among global investment management firms around the world," he added.