An IFA caught up in the Keydata debacle is urging investors not to pin all their hopes on a judicial review into the failed investment vehicle.
Andrew Swallow says demands from the Keydata Victims Action Group for a review into the FSCS's decision not to pay out to investors in non-ISA Keydata products SIB1-3 are "laudable in principle".
But he cautions investors against "getting their hopes up" and for IFAs to remember who pays the bill if the challenge is successful.
"A jaundiced person might suggest the only people who will get any money out of this will be the lawyers," he says.
Last month, the FSCS said it "anticipates" only Keydata investors who invested money via ISAs will be eligible for compensation.
The FSCS says: "Although we consider it is possible Keydata breached contractual and other legal obligations owed to non-ISA Investors, we cannot be sure on the evidence currently available to us that any such breaches caused a loss giving rise to a valid claim for damages."
Founder of the Keydata Victims Action Group Peter Magowan says he expects a legal challenge to the decision to be launched "within two to three weeks".
He is also calling on investors to take advantage of the power battles over political seats in the run-up to the General Election by writing to their MPs to take action on the Keydata issue. This could include joining Vince Cable, among others, on his MPs who Care campaign.
Swallow, who has clients affected by the Lifemark, SLS, Keydata and Keydata International investment vehicles, says depending on cost he would be willing to get involved in a legal challenge but IFAs should be prepared to lose out financially either way.
"If the review goes ahead and successfully overturns the FSCS decision, who pays? IFAs do.
"Either way, we pay through professional indemnity insurance because the FSCS sues us in a legal battle, or we pay when the FSCS collects a levy from us to pay out compensation."
The real responsibility lies with the FSA, he argues.
"Of course, it doesn't matter how bloated and incompetent the FSA is, we can't sue them because they have immunity."
Elsewhere, law firm Regulatory Legal is preparing to mount a challenge against the FSCS's interim levy, recently scaled down to £58m from £70m, to cover the costs of a number of high-profile investment failures, including Keydata. The FSCS says advisers in the investment intermediation sub-class must pay the levy by 30 April.
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