“They have pulled the tiger’s tail and the tiger is going to bite them back” - defiant ‘death bonds’ boss hit with £75m fine

Those were the defiant words of Scottish businessman Stewart Ford who was yesterday fined £75 million by the Financial Conduct Authority –the largest penalty ever imposed on an individual and 20 times the previous record.

The City regulator also banned Mr Ford, who was the former chief executive of Keydata which was dissolved in 2014, for life from taking part in financial services.

But the entrepreneur, and two former colleagues at Keydata, which the FCA (then the Financial Services Authority) originally forced to close in 2009, are appealing the decision to the special administrative court, the Upper Tribunal in London, which will make a final ruling.

And Ford, who said that he is “relieved”, not fazed, by the FCA’s decision, also announced that he is to hit the regulator with a retaliatory civil action for £650m in damages.

The FCA decision is a result of an FSA finding in 2009 that Mr Ford and colleagues Mark Owen and Peter Johnson had sold so-called “death bonds” as qualifying for tax-free Individual Savings Accounts, even though they allegedly knew this was not the case.

Keydata was shut down, the FSA said, because it could not cover the tax bills that should have been paid on the bonds, which are derivatives from the second-hand life insurance policies of elderly Americans.

On Monday, the now FCA issued a 63-page decision notice on Mr Ford and his colleagues; Mr Owen, who was the former sales director at Keydata and received commissions worth £2.5m, was fined £4m.

While Mr Johnson, Keydata’s former compliance officer was fined £200,000.

They, too, have been banned from ever working in financial services again.

Delivering their decision yesterday, the FCA said the way the bonds were sold – to some 37,000 people - was “unclear, incorrect and misleading”.

By buying the bonds, purchasers were investing in second-hand life insurance policies, which would pay out when the original owner died.

The policies were originally sold by citizens in the United States, who are allowed to cash them in.

Investors, who bought the investments between 2005 and 2009, were incorrectly told that they were eligible for Isas but between them lost at least £330m - the value of the bonds involved.

The FCA said the bonds were not suitable for ordinary private investors, because of the risk involved and that Mr Ford had received £72.4m in fees and commissions on the sales.

Investors are currently being refunded by the Financial Services Compensation Scheme (FSCS).

The FCA said the three men had also misled the previous City regulator, the FSA, in relation to the performance of the investments.

However, Mr Ford has pledged to fight the FCA ruling in the High Court, and said he would also file a claim for damages, claiming that the the FSA had exceeded its powers when it decided to close Keydata down.

His £650m claim for damages against the FCA also includes the global accountancy firm, PricewaterhouseCoopers.

“The past six years have been a nightmare for myself, my family and the former employees of Keydata,” said Mr Ford.

Speaking to the Herald newspaper in the wake of the FCA ruling, a defiant Mr Ford said: “I am the victim of a crime and I am the victim of a regulatory stitch-up.

“The old FCA turned on Keydata because they were under a lot of pressure during the financial crash and they were trying to look tough.

“Well, they did a terrible job. Keydata was a well-managed, profitable company that employed 140 people.”

Mr Ford declined to tell the paper if he could meet a £75m fine if forced to do so.

He said: “The £75m fine figure is meaningless unless the Upper Tribunal decides to uphold it. Do you think they would get £75m? I think not.”

He added: “We were tossed aside by a regulator who was hell-bent on destroying a successful and well-run business in order to justify its continued existence.”