The founder of Keydata has blasted the FSA for "draconian action" he claims led to the investment firm's unnecessary insolvency and collapse.
A spokesperson for Stewart Ford said last June when the FSA applied to the High Court to put Keydata into administration, the firm "was a very successful and financially sound company", worth more than £60m with little debt.
When Keydata closed down last June, one of the reasons the FSA gave was it could not afford to pay a £5m tax bill.
But Jack Irvine, the PR consultant acting for Ford, said the tax bill was a "red herring" and claims Keydata's collapse was "deliberately manufactured".
"It was not a notional tax bill that led to Keydata's administration. It was the deliberate and calculated actions of the FSA," he says.
But the FSA refutes the allegations, pointing Keydata's management never opposed its insolvency application.
"HMRC established that several Keydata products were not eligible for ISA status which gave rise to a significant tax liability which Keydata had no means to pay," says an FSA spokesperson.
"This liability put its investors at significant risk," she adds.
But Irvine argues there was no tax bill, just a "contingent liability" to HM Revenue and Customs if it was accepted investment bonds issued by SLS Capital and Lifemark breached ISA regulations.
He criticises the FSA for not mentioning a "commonly utilised" HMRC remedial procedure that would have allowed Keydata to rectify any ISA problem confidentially without there being any prejudicial effects for investors.
Irvine says Keydata was "well down the track" to reaching an agreement with the HMRC about the ISA status of its bonds when the FSA stepped in.
"The FSA did not intervene in those negotiations with HMRC in a constructive way," he says.
"If, as was likely, Keydata had been able to agree a ‘simplified voiding' deal with HMRC, the underlying investors would not have been caused any anxiety and distress, and would not have been exposed to any financial penalties.
"Despite this, the FSA's only concern was to frustrate and prevent the successful conclusion of Keydata's negotiations with HMRC."
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