THE former finance director of collapsed investment firm Keydata has been fined £350,000 by the Financial Conduct Authority and banned from working in the finance industry.
Craig McNeil, Keydata Investment Services’ FD at the time of its administration in 2009, was sanctioned over his failure to challenge a series of financial irregularities, or to report them to the City regulator.
When Keydata, which designed and sold investment products to retail investors via IFAs, collapsed in June 2009 its administrators discovered accounting errors and missing payments.
The firm used investments in bonds issued by Luxembourg-based special purpose vehicles to underpin its products. Problems arose when one of the vehicles, SLS Capital, which invested in portfolios of life settlement policies, failed to make certain payments to investors that were due in early 2008.
Keydata had instead funded £4.2m in income payments to investors from its own company resources, masking problems with SLS and the performance of the SLS portfolio, the FCA said.
The FCA said McNeil was aware of the payments and failed report the matter to the regulator.
McNeil also failed to challenge a decision to enter into a complicated transaction which attempted to obtain security for the missed SLS payments and permitted the release of £500,000 of Keydata’s corporate funds without having a clear understanding of the transaction or its risks, the FCA added.
Although Keydata paid the funds to the seller, Keydata did not, in fact, obtain the security.
Georgina Philippou, acting director of enforcement and market oversight at the FCA, said: “The FCA relies on senior directors such as Mr McNeil to let us know about significant risks in their firms, especially when they have a direct bearing on customers’ investments.
“It was not reasonable in the circumstances for Mr McNeil to rely on the fact that other directors might eventually tell us what was happening. If Mr McNeil had acted, and acted quickly, concerns about SLS may have come to light sooner.
“Further, as Keydata’s finance director, Mr McNeil should have understood the risks of the transactions he was authorising.”
McNeil agreed to settle at an early stage of the FCA’s investigation and therefore qualified for a 30% discount.
McNeil responded that the FCA misled him into agreeing to settle this in 2011. “They withheld key information from me with respect to both allegations and then broke their side of the bargain by dragging out the rest of the process for another four years when they’d promised to finish matters ‘as soon as practicable’,” he was quoted in the FT.
“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.
McNeil continued that the FCA’s claim that he should have explained what was happening in words of one syllable is “nonsense”.
“To claim that it was my job to tell them about the operation and the products is clearly untrue,” he said.