FSA wrong to use Keydata emails

The Financial Services Authority has been told by the High Court it cannot use legally privileged emails as evidence in its case against the collapsed investment firm Keydata. The court decision yesterday puts into doubt the continued investigation into the firm, which went bust in 2009, leaving 30,000 investors some £450m out of pocket.

Keydata's founder Stewart Ford yesterday accused the FSA of "a regulatory stitch-up" after he won a High Court judgment against the regulator, the first time an FSA own-initiated investigation has been the subject of a successful judicial review.

Mr Ford brought the review against the FSA after discovering it had used emails from Keydata's legal advisers, Irwin Mitchell, as part of its investigation. The emails contained legal advice to Mr Ford about his and the company's defence in the FSA investigation.

But Judge Ian Burnett said the emails are covered by the attorney-client privilege. He also suggested the FSA learn how the Serious Fraud Office and police deal with potentially legally privileged material "to determine whether similar practices might be adopted".

Mr Ford's lawyer Harvey Knight, partner at law firm Withers , said: "This episode, along with the FSA continually ignoring its own guidance and procedures in its investigation into Keydata, raises serious questions about the regulator's own conduct. In light of this ruling, there can be no doubt that the FSA needs to take a long, hard look at its procedures and how it conducts itself."

The FSA said: "The judgment concerns whether or not Mr Ford could claim privilege in respect of eight documents and concluded that in six cases he could not. There will be a further hearing in due course to determine remedy."