The Financial Services Compensation Scheme (FSCS) has made top-up payments to Keydata investors after it recovered money from the underlying bond Lifemark's trustees.
These payments, around 2.5% of the invested capital, brought the total amount paid out to investors by the trustee to 13% of the capital invested - the majority of the estimated 13%-15% the trustee said it would pay out.
Further top-up payments are anticipated for September this year, the trustee said in a bondholder notice issued earlier in the month.
The balancing payments should reach the eligible investors - those with more than £30,000 invested who have not yet received their total compensation due - by mid-April, the FSCS said.
Keydata bonds were sold to UK investors via financial advisers, largely on the grounds that they were low risk and offered returns that were uncorrelated to the stock market.
But in June 2009 Keydata was put into administration due to severe liquidity problems as the second hand life polices backing its bonds failed to mature as expected, and amid claims of a misappropriation of funds.
The FSCS has accepted Keydata investors are eligible for compensation from the scheme. It has so far levied investment advisers about £242m of a total £326m interim levy for Keydata compensation costs.
However, together with law firm Herbert Smith, the FSCS is also pursuing recoveries from advisers who recommended Keydata through the courts, on the grounds they may have given unsuitable advice.
'Necessary steps' taken
Penalty payments and enforcement policy
Fees as low as 0.04%
Client procurement costs ‘unsustainable’
Only 9,486 applied for the benefit in 12 months