The FSCS will ‘pre-approve' claims from eligible investors in Keydata plans backed by Lifemark despite no date being set for payouts.
In an unusual announcement last month, the scheme encouraged investors to complete and return application forms for compensation if they relied on flawed Keydata marketing materials to invest in the products.
However, investors have not been told how much they can expect in compensation, or even when they will receive the money.
One IFA, with client money in Keydata bonds, who queried the announcement has been told by the FSCS it wants claimants to return forms so it can make ‘provisional eligibility awards'.
These amount to a pre-approval of an investor's claim for a future payout but only if the FSCS is in a position to quantify their loss.
The ‘provisional' awards provide investors and the FSCS with a fall-back position as they await the outcome of a financial restructuring of Lifemark
FSCS claims against Keydata are likely to be heavily mitigated if a long-term financing deal to keep the fund out of insolvency can be reached between Norwich & Peterbourgh Building Society (N&P) and US hedge fund CarVal.
N&P could still be hit with a £50m bill for compensation as it faces several Financial Ombudsman (FOS) rulings for over-exposing customers to Keydata bonds.
Investors who have already submitted their claims to the FSCS should hear by the beginning of November if their claims have been successful.
But as a bondholder vote on any longer-term financing for Lifemark is not expected before February, investors are unlikely to have their claims paid before the New Year.
To encourage claims, the FSCS says it is not requiring investors to detail 'technical' breaches within the marketing material. But it adds it can not highlight the specific parts of its rules which Keydata breached, and which investors should identify.
Investors whose claims are initially rejected retain the right to appeal.
In a statement on its website, the FSCS says: "We are encouraging all investors who have been sent an FSCS application form to complete it and return it to us as soon as possible so that we can determine whether or not their claim is eligible for compensation.
"This will enable us to start making compensation payments as soon as we are in a position to quantify investors' losses."
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