FSA Must Destroy E-Mails Used in Keydata Probe, Judge Rules

The Financial Services Authority must destroy privileged attorney-client e-mails it obtained during its investigation into collapsed investment firm Keydata Investment Services Ltd., a London judge said.

The privileged documents must be deleted or destroyed, and all references to them redacted, Judge Ian Burnett said today. Keydata and its founder Stewart Ford won a ruling in October that the regulator shouldn’t have used the e-mails.

The judge refused requests by Ford’s lawyers to have the FSA’s 2010 warning notice thrown out, and for any investigator who had seen the protected e-mails to be removed from the agency’s probe.

“I do not consider that the fact that the investigators and in-house lawyers have seen material which cannot now be used,” creates prejudice against the Ford, Burnett said.

The FSA had to suspend its four-year investigation into Keydata because of a judicial review into its conduct. Keydata administered 2.8 billion pounds ($4.49 billion) of assets when the FSA asked a court to place it into administration in 2009.

The regulator was examining whether Keydata targeted investors with potentially misleading advertisements, and potential tax irregularities.

“We are pleased that the court has recognized that our client’s right to legal privilege has been infringed and has ordered the FSA to take steps to rectify matters,” Ford’s lawyer Harvey Knight said in an e-mailed statement. The decision not to quash the warning notice, or remove investigators who had seen the e-mails, may be appealed, he said.

FSA spokeswoman Cerris Tavinor said: “Our work in this area remains a priority for us particularly given the public interest in the Keydata matter.”

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