The Financial Ombudsman Service (FOS) has made a provisional ruling that a financial adviser working for AWD Chase de Vere was wrong to invest almost £80,000 of an 80-year-old's pension in failed fund Keydata.
The then-80-year-old man and his 77-year-old wife were recommended to invest £79,684 in a seven-year Keydata plan in 2007, after scoring four out of ten - or cautious to moderate approach to risk - on a risk rating.
According to the FOS, to a professional financial adviser, the Keydata investments "would not and should not have been suitable for a cautious to moderate risk investor".
"Indeed, given what was known, or should have been known about Keydata investments by the IFA at the relevant time, I have real doubt - given the opaque nature of the investments and the significant uncertainty around accurate valuation and liquidity - whether such a fund would have been suitable for all but the most experienced of retail investors and certainly not for investors such as [the couple]," the FOS adjudicator said.
He continued: "It is not sufficient for the IFA simply to state that it relied on the headline description of the investment when making their assessment of suitability.
"Similarly it would not be fair or reasonable for the IFA to rely on the list of bullet points which set out the circumstances where a consumer may receive less than the amount they invested."
It is unknown whether the IFA will contest the case but, in his defence before the FOS's provisional ruling, he said he only invested 25% of the clients' money in Keydata, and that the FSA had previously determined that is an "acceptable" exposure to a specific asset class.
However, the FOS adjudicator said that, even if a much-smaller proportion of the portfolio have been exposed to Keydata, this would not alter his view that it was an unsuitable recommendation.
A spokesperson for Regulatory Legal, who acts on behalf of the clients, said: "The FOS machine is issuing provisional decisions after a near-18 month delay. The decisions that we have seen find in favour of the investor.
"Our view is that AWD had significant exposure to Keydata matters through the FSCS proceedings and various FOS claims."
A spokesperson for AWD said it would not comment on the case as it did not know the specifics.
He said: "My best guess is that this case has gone through a claims management type business which wants to get publicity for itself. These firms can charge clients a fee of up to 12% to access the Financial Ombudsman Service; a service which is independent and should be completely free for people to use."
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