HM Treasury may step in to support victims of the Keydata Investment debacle, according to reports.
The Keydata Victims Action Group believes the Treasury could get involved as within a month of the launch of Keydata Secure Income Bond in September 2005, the FSA was put on notice by senior executives of both HSBC and KPMG regarding materially false claims in Keydata's literature.
Critics of the FSA's role in the debacle claim investors are suffering loss and hardship now because the regulator failed to adequately supervise Keydata during the 24 month period from receipt of the information from KPMG and HSBC.
In total 30,000 investors have over £500m invested in the failed SLS and Lifemark-related products.
So far it has been left to investors to form their own ad hoc support groups in a bid to salvage lost funds.
But following the reports, investors say they would welcome official assistance as they "firmly believe government agencies are better placed to seek recovery than individual investors".
The FSA declined to comment on the issue but it has faced a wave of strong criticism over its handling of the case.
In December, AIFA called for the FSA to immediately review its authorisation procedures, following news IFAs will need to pick up the tab for Keydata compensation.
It believes the FSA had wrongly authorised the structured product provider as part of the investment intermediation sub-class.
The total cost of compensating Keydata victims via the Financial Services Compensation Scheme (FSCS) is £70m, with the ‘typical' adviser firm in the sub-class taking a hit of £440, according to AIFA calculations.
AIFA said the FSA had failed in its role as regulator by allowing the firm to be authorised in this sub class.
Chris Cummings, director general of AIFA, said: "This is clearly an issue for the regulator as it has allowed a firm to position itself as one thing and yet be authorised as another. If this was known by FSA, which has to review each business plan of every firm seeking authorisation, then the firm should have been refused authorisation."
Law firm Regulatory Legal is currently pursuing a judicial review against the FSCS's decision to levy the investment intermediation sub-class over Keydata.
Investors who have lost money over Keydata are being encouraged to lobby the Treasury to force it to act.
Two global vehicles
'Further plug advice gap'
Must appoint separate CEOs and boards
Advisers do come out well
Will report to Mark Till