David Prosser: It's time for a public inquiry into Keydata

Outlook In 2009, following a global financial crisis during which it was accused of being asleep at the wheel, the Financial Services Authority (FSA) was anxious not to mess up again. So when it came across some problems at a company that had sold the best part of £500m worth of savings products to tens of thousands of retail investors, it was quick to shut it down.

Two years on, the FSA now has a problem of its own. It is still not at all clear that its decision to force Keydata, the company in question, out of business was justified. The Serious Fraud Office (SFO) said this week that there was not the evidence to bring prosecutions against anyone at Keydata, while the angry founder of the company, Stewart Ford, who has always denied any wrongdoing, accuses the regulator of making a "catastrophic intervention".

The FSA's own inquiry intoKeydata is continuing and until its findings are made public, we will not be in a position to judge Mr Ford's assertion that if the regulator had not got involved, investors would have received every penny they were promised.

However, even then, given the SFO's announcement, the FSA's report is not likely to convince everyone. An independent inquiry is necessary.

Following the Equitable Life scandal, in which an independent inquiry concluded that Cityregulators and the Government itself should bear much of the responsibility for the insurer's near-collapse, this is probably the last thing that the Treasury wants to consider.

However, the closure of Keydata has had dramatic effects. In addition to the anxiety caused for investors, the Financial Services Compensation Scheme has been forced to ask other financial services firms for more than £200m in order to pay redress. The affair has also prompted the Norwich and Peterborough Building Society, one of the biggest sellers of Keydata products, to put itself up for sale. Mr Ford, meanwhile, believes he has no choice but to take legal action against Keydata's administrators in order to protect his own investments. All of these parties deserve to have their grievances publicly aired.