The FSA wrote to ten IFA firms selling Keydata products with serious concerns about the suitability of their advice as early as October 2007, but failed to alert the wider industry or investors.
Two years before the regulator placed Keydata into administration, it outlined a catalogue of failings in the IFA firms' marketing and distribution of the Secure Income Bond (SIB) and Secure Income Plan (SIP) products.
The letters followed a low-key thematic review into the advice processes of some firms known to be recommending the Keydata SIB or SIP vehicles.
But the regulator only published the review's findings to the firms that took part. This week, an FSA spokesperson said the review was considered "too small" to be made public.
In its 2007 letter, the FSA warns the firms some of their IFAs have not been properly trained to advise on Keydata products and are therefore giving inadequate advice. It also says they are describing the products poorly in customer suitability letters.
The letter warns the companies risk enforcement proceedings unless they correct staff training and advice failings. But it does not mandate IFAs selling Keydata products to inform past or present investors of the FSA's concerns.
Speaking to IFAonline this week, an FSA spokesperson says: "The review found failures to train staff about Keydata products, failures to [ensure] advisers were giving adequate advice, evidence of poor advice, and evidence products were described poorly in suitability letters."
Keydata was sent to formal enforcement by the FSA in December 2007, but another two years passed before the regulator applied to have the company put into administration for insolvency as a result of a tax liability on 8 June 2009.
The revelations have raised further questions about the FSA's role in the debacle.
Retiree Rosemary Rodford, who with her husband invested £112,000 in four Keydata SIBs and SIPs after advice from a Park Row IFA, says she would have requested her investments were withdrawn if she had known about the FSA review.
"We would have paid the £150 administration charge and moved our money somewhere safer. The FSA has a huge amount to answer for, as much as Stewart Ford if not more."
The Rodfords are also fighting a mis-selling claim against Park Row as they say the IFA firm failed to properly explain the products. "We feel we were mis-sold as we didn't understand the risks in the products."
As revealed by Professional Adviser last month, Keydata directors knew as early as 2005 their promotional literature was "misleading" and "inaccurate".
This week, the FSCS ended months of uncertainty by confirming it can compensate investors with Keydata products backed by Lifemark. But investors will not know the amount they will receive until the end of October.
The compensation scheme found Keydata's marketing materials used to promote the products failed to comply with FSA rules.
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