In a statement on its website, the watchdog said Peter Francis Johnson had failed to act with integrity and “deliberately mislead” the FCA on “a number of occasions”, adding that it would have fined him £200,000 had he not been in serious financial hardship.
Keydata Investment Services (Keydata), which sold investment products backed by life settlement bonds, went into administration in July 2014 after failing to keep up income payments to investors.
According to the British regulator, between 26 July 2005 and 8 June 2009, 37,000 investors purchased the firm’s products, investing over £475m ($689m, €611m).
Despite previously having £2.8bn of asset under administration, the FSCS was forced to pay out £330m in compensation to investors when the Keydata went bust.
Ongoing investigations
Johnson had lodged an appeal against the regulatory action, but has since withdrawn. Upper Tribunal cases will still be held in relation to former Keydata chief executive Stewart Ford and former sales director Mark Owen.
Last year, Ford was fined £75m by the FCA for misleading the regulator and for failing to act with integrity in his role at the firm.
In September 2015, Keydata former finance director Craig McNeil was fined £350,000 and banned from performing any role of “significant influence”.
At the time, McNeil described the ruling as “ill informed, inaccurate and self-preserving”, adding that he was “stitched up” by the watchdog, which “misled” him into settling in 2011.
“Keydata covered payments to investors and advisers from its own resources during the period of the alleged SOP 4 breach. I reported this exposure on our FCA financial return in March 2009.
“The FCA ignored this disclosure because no one at the FCA looked at this financial return. The FCA’s claim that I should have rang them up and explained what was happening in words of one syllable is nonsense. If they cannot read financial figures, they should not be regulating financial firms,” he said.
SLS and Lifemark products
In its decision, the FCA said Keydata Investment Services (Keydata) designed and sold investment products to retail investors via IFAs, which were underpinned by investment in bonds issued by two Luxembourg special purpose vehicles called SLS Capital S.A (SLS) and Lifemark S.A (Lifemark). In turn SLS and Lifemark invested in portfolios of life settlement policies.
The FCA found that Johnson had failed to act when he received complaints that Keydata’s financial promotions were unclear and misleading.
Keydata had been advised that its due diligence was inadequate, and the Lifemark and SLS portfolios, which underpinned Keydata’s investments into life settlement policies, was underperforming.
“[Johnson] recklessly failed either to take adequate steps to ensure that Keydata addressed the issues and risks that had been identified in relation to the Lifemark Products… despite becoming increasingly aware of the severe risks affecting the Lifemark Portfolio,” said the FCA’s final report.
Delibrately misleading
Instead, he repeatedly lied, telling the regulator that there had never been a problem with the income payments on the SLS of Lifetime products.
In fact, Johnson knew there was considerable doubt about whether SLS would make income payments and of the severe liquidity and other risks with the Lifemark Portfolio.
“The Authority considers that Mr Johnson’s failings in this regard are of the most serious nature in light of the significant level of consumer detriment which has arisen from the sales of the products and the impact which this level of consumer detriment has had on the financial services sector,” said the FCA.
