Keydata has been declared in default by the Financial Services Compensation Scheme (FSCS), meaning customers can start making claims.
The FSCS will now begin sending out claim forms to customers of the structured product provider, which was placed in administration on 8 June 2009. Nearly 50,000 investors have been affected.
ISA investors in the Secure Income Bond issues 1,2 and 3 are likely to be eligible for compensation, as they were wrongly sold the products under the belief they were ISA qualifying.
Other investors in the plans may also apply for compensation if they believe they have suffered financial loss as a result of the firm's actions.
A number of underlying assets held in the plans have been liquidated and were misappropriated, prompting the original decision to place the firm into administration.
ISA investments in products including the Secure Income Bond issue 4, the Secure Income Plan issues 1 to 12 and 14, the Defined Income Plan issues 1 to 8 and the Income Plan issues 1 to 12 and 14.
HMRC has confirmed these Category Two products, which were promoted as eligible for an ISA, do not meet the requirements for ISA investments. This only affects ISA products which had a term of five years or less and there are approximately 16,000 investors in these affected funds.
For the period before Keydata went into administration (8 June 2009), investors will not have to pay any tax because HMRC will pursue recovery of the tax from Keydata itself.
For the period following administration, the FSCS anticipates that the majority of investors in Category Two will be eligible for compensation in respect of any tax losses incurred as a result of the fact that these investments were not ISA-qualifying.
Moreover, the FSCS and HMRC are developing a process whereby the FSCS would pay compensation on behalf of eligible investors to HMRC each year, avoiding the requirement for investors to pay the tax to HMRC upfront and later claim it from the FSCS.
The FSCS expects to write to affected investors with details of the claims process by the end of December.
If you or any of your clients are affected, please let us know by emailing [email protected]
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