Keydata Investment Services, the insolvent investment firm, mis-sold £250 million of income bonds and savings plans to 30,000 individual customers, it emerged last night, as 40 bidders lined up to buy the company.
Dan Schwarzmann, a partner at PricewaterhouseCoopers, the administrators to Keydata, said that he had established that investors’ capital was safe. However, they may still be hit by an unpaid tax liability on their investments of at least £5 million.
Mr Schwarzmann is expected to receive guidance from HM Revenue & Customs on whether Keydata or its customers have to pay the tax bill in the coming days. He said he could not yet comment on where the tax liability lay.
Keydata was declared insolvent and forced into administration by the Financial Services Authority, the regulator, on Monday. At the time Keydata held £2.8 billion of assets.
More than 80,000 individual savers with investments totalling £700 million and 20 institutions for whom Keydata provided funds services were left facing uncertainty about what would happen to their money.
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PwC has since discovered that Keydata, which specialised in structured financial products, sold apparently tax-efficient secure income bonds and other savings plans that did not comply with HMRC tax rules.
Keydata distributed its products through thousands of independent financial advisers, who were also unclear about what advice to give customers after the move into administration.
Mr Schwarzmann said that, once the administration order was released, investors and institutions would be free to redeem their assets. He said that PwC was paying out to those investors whose policies matured this week, despite the administration being in place.
PwC is aiming for a rapid sale of Keydata as a going concern in order to maintain the stability of the company and to prevent investors rushing for the exit.
Mr Schwarzmann said that the list of potential buyers had increased from 30 to 40 during the course of yesterday.
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He said that he was confident the business could be sold by the end of next week.
The most likely buyers include trade rivals of Keydata and investment boutiques that are keen to secure a foothold in selling structured products. Jubilee Financial Products, an investment company set up by four former derivatives traders at Credit Suisse, is one of the interested parties.
Mr Schwarzmann would not comment on the sale process or a likely value for the company.
Keydata operates from three offices, in London, Reading and Glasgow, and employs about 100 staff.
Jubilee has said that in principle it is committed to taking on all of Keydata’s staff.