N&P selling Keydata to 'anyone and everyone'-Fatchett

14 September 2010

The full extent of Norwich & Peterborough clients’ over-exposure to Keydata products has been laid bare as law firm Regulatory Legal says the issue will likely end in the courts. Data compiled by Regulatory Legal relating to sales practices at N&P reveals Keydata products were sold to elderly, risk averse and unsophisticated investors who did not understand the risks involved. The information comes to light as Regulatory Legal, which is representing 248 N&P clients, holds a meeting in Norwich today as it looks to sign up more clients. Partner Gareth Fatchett says his clients lost around £10m by investing in Keydata products through N&P. The figures compiled by the law firm highlight the over-exposure of N&P clients to Keydata, with 180 out of 207 clients investing 100% of available funds into Keydata. The average percentage of available funds invested into Keydata was 91%. "The default investment selection for three years was Keydata," says Fatchett. "N&P were looking to sell Keydata products to anyone and everyone. The bulk of the clients put money from deposit accounts into N&P and were told they would get a higher return." The figures also reveal the extent to which N&P failed to explain the inherent risks in Keydata products. Of 183 investors, a huge 95% said counterparty risk was not adequately explained. Of 185 investors, only seven received an explanation of actuarial risks and only 22 had longevity risks explained to them. Furthermore, only 7% had the total capital loss risk described. The data also throws light on the risk-averse nature of investors, with 94% saying they were not prepared to put their capital at risk. Of 192 investors, only 14, or 7%, considered themselves a 'sophisticated' investor. The majority of clients were in their 60s and 70s. with five aged between 81-85. Three quarters of clients were looking to supplement pension income, with 74% of clients citing income as reason for investment. N&P advisers also failed to spell out their commissions. Of 181 clients, only 34% said the impact of commission on their investment plans was explained. Ahead of the meeting in Norwich, Fatchett says he expects his clients' case to be heard in the courts. "After analysing the complaints we will put in a claim to N&P," he says. "It looks as if we are heading in the general direction of a professional negligence accusation in the courts." N&P chief executive Matthew Bullock recently said its customers lost money in Keydata because of fraud and not mis-selling. Last month, an elderly couple caught up in the Keydata collapse became the first N&P customers to successfully claim the building society mis-sold products, exposing them to "inappropriate risk". An FOS ruling recommended N&P repays the couple's £28,000 investment plus interest. Published by IFAOnline