Key Data Investment Services - An Update
In this article we clarify the latest situation regarding Keydata and offer guidance for investors who may be affected.
Why did Keydata go into administration?
An issue arose when the FSA discovered that certain ISAs issued by Keydata were not compliant with ISA regulations and so did not qualify for tax relief. Keydata were asked to repay the tax relief given on these products and did not have the money available to do so. This led to Keydata being placed into administration with PricewaterhouseCoopers (PwC) acting as administrator.
What is the current position?
Initially Keydata was going to be sold, but PwC have so far been unable to find a buyer so are continuing to act as administrator. They are working closely with HM Revenue and Customs (HMRC) to try and settle the tax issues for Keydata investors. There is still a great deal of uncertainty surrounding the tax situation and we do not expect a solution to be reached quickly.
PwC are still in the process of clarifying the status of clients’ investments and ensuring that their income payments continue where possible. PwC will review each product and talk to the underlying product providers about ISA eligibility and withholding tax from income payments. Investors will not be required to declare income payments on their tax returns where PwC are satisfied of a product’s ISA status and have assurances that income can be paid gross.
Only Stocks and Shares ISAs are affected by the tax issue and some income payments have been suspended until further notice. Other income payments are being made but net of basic rate tax pending clarification of the tax position. Cash ISA products are not affected and payments are continuing as normal. Also unaffected are products backed by Third Parties where Keydata only acted as an administration service.
The Financial Services Compensation Scheme (FSCS)
The following extract is from the FSCS Keydata update on 25th August 2009:
“The FSCS… are working hard to determine the extent of the FSCS's potential involvement (if any) in relation to Keydata.
If it emerges that Keydata has caused retail customers to suffer a financial loss for which it is liable, and it cannot meet those liabilities to investors, the FSCS may be able to help. If there is compensation for the FSCS to pay, the FSCS will confirm Keydata to be "in default". If that happens, the FSCS would assess any claim made by a Keydata customer on a case by case basis in accordance with the rules set for us by the FSA and in light of the available information.
We are specifically looking at whether Keydata can be held legally liable for the losses that may have been suffered by investors as a result of the problems identified by the Administrators. It is too early to say when we will complete this work; this is a complicated situation and it may take some time for the facts to become clear, but we are doing everything we can to complete it as soon as possible.
Keydata investors do not need to contact the FSCS at this stage. The FSCS will update its website as soon as any new information becomes available. Although we are not able to say at this time when the FSCS will be in a position to confirm whether it is able to step in to help Keydata investors, we will provide investors with a further update via our website by the end of September 2009, if not sooner.”
Source: FSCS website
Keydata Income Property Bonds – PwC update 27 August 2009
PwC have confirmed that Keydata used their own funds to finance shortfalls on corporate bonds issued by Hometrak S.A., a Luxembourg special purpose vehicle. Underlying failures in the Hometrak investments were therefore not exposed and investors were unaware of any problem.
No interest will be paid on the Income Property Bonds until further notice. PwC are in talks With Hometrak S.A. to establish whether any principal or interest will be recoverable for investors in the Income Property Bonds.
Source: PwC website
As an investor, what should I be doing?
The first thing investors need to do is to clarify the status of their investment. In order to do this, you will need to know who your investment is backed by. This should be clear from the paperwork provided with your investment when you originally took it out. PwC also provide a lot of information on their dedicated webpage www.pwc.co.uk/KIS/, but if you are unsure you should call Keydata directly on 0844 391 3412.
Many investors will simply have to wait for answers to their questions and there is still a long way to go before the situation is resolved. The PwC website, Keydata phone line and our updates will help keep you informed of the latest developments.
If you any questions please do not hesitate to contact our Investment Helpdesk on 01225 823975.