ALMOST ALL 15,000 clients of collapsed financial spread-betting firm Worldspreads are covered by a compensation scheme operated by its UK regulator.
The Irish-headquartered Worldspreads plc group collapsed in March when the board discovered a £13 million (€16.15 million) shortfall in client funds in its main operating business, London-based Worldspreads Ltd. The company owed its clients £29.7 million but had just £16.6 million to pay them.
Yesterday, the UK financial services authority confirmed that almost all Worldspreads’ 15,000 clients qualified for a statutory compensation scheme established to protect customers of financial services firms.
The financial services compensation scheme covers losses up to £50,000.
Worldspreads owed about 80 clients more than £50,000. In their case, the compensation scheme will pay them £50,000, and they will be able to recover a portion of the balance from a pool established by the special administrators who took over the company in March.
The pool will be established from the company’s remaining resources and those clients will be repaid on a pro-rata basis. In other words, if the pool covers 50 per cent of the company’s liabilities, they will be paid 50 per cent of the figure due to them above £50,000.
The Irish-headquartered Worldspreads plc group collapsed in March when the board discovered a £13 million (€16.15 million) shortfall in client funds in its main operating business, London-based Worldspreads Ltd. The company owed its clients £29.7 million but had just £16.6 million to pay them.
Yesterday, the UK financial services authority confirmed that almost all Worldspreads’ 15,000 clients qualified for a statutory compensation scheme established to protect customers of financial services firms.
The financial services compensation scheme covers losses up to £50,000.
Worldspreads owed about 80 clients more than £50,000. In their case, the compensation scheme will pay them £50,000, and they will be able to recover a portion of the balance from a pool established by the special administrators who took over the company in March.
The pool will be established from the company’s remaining resources and those clients will be repaid on a pro-rata basis. In other words, if the pool covers 50 per cent of the company’s liabilities, they will be paid 50 per cent of the figure due to them above £50,000.
Hi rav, did you attend the creditors meeting today? Anything of interest?
ReplyDeleteThere is an article on ft.com which briefly mentions the meeting.
I attended.
ReplyDeleteWhat seemed to attract most discussion was the treatment of clients verses the other creditors. When WS collapsed there was about £16.6m but only about £5m was in Client accounts and £11m in company accounts.While it is obvious that the clients money had been moved to the comapny, the trade creditors and Bank creditors (RBS) want to claim the money in company bank accounts. In particular, RBS wants to be paid in full as a secured creditor out of money held in company bank accounts.
A number of clients at the meeting said hold on, that money is client money stolen from clients and illicitly transfered and should be returned to their rightful owners,i.e the clients BEFORE any payout to trade and bank creditors.
KPMG seemed to agree but implied it was too difficult to identify the illegal transfers from the client accounts to the company.
But KPMG agreed not to make any payout until it had tried to identify the illegal transfers. If they can do so, the amount distributed to clients will rise.
So the law says client money has to be segregated.
DeleteBut nobody actually enforces the law.
And so when a company helps itself to client money for years and only stops when they run out of client money to pinch, the law says that a secured creditor can be paid first and in full BECAUSE the Directors have illegally stolen client money.
The whole point in client funds being segregated was to protect the clients yet the rule when broken actually protects the Banks.
The FSA rules have protected RBS not you and me.
RBS were charging interest rates on its loan to reflect the fact that the company could go bust and be unable to repay them.They had a risk premium built in.
Clients by contrast were paid no interest on cash held because they thought that the company was regulated by the FSA and client money protected from other creditors by being held in Trust accounts.
The FSA rules have protected nobody except the Banks.It doesnt exactly incentivise RBS or any bank to raise suspicions about a firm co-mingling client and company money.They stand to gain if they do.
Unbelievable, truely unbelievable.
couldn't agree more. The whole system is a rigged scam. The client should be sacrosanct and paying them back should be the absolute first priority ahead of any commercial loans. Loans are made on a risk basis, deposits are not.
DeleteThank god somebody at the meeting put KPMG into place, their stated main goal of returning funds to clients as quick as possible has been proven to be a joke. They are dragging their feet and absolutely do not have our interests at heart. They have fallen at the very first hurdle......
Is there anything more you can say from the meeting ?
Thanks for the update, was there any indication of timescales, i notice you mentioned september? Will the fscs have to wait until this date too as they will reclaim the funds from kpmg or is it possilbe there could be any payment earlier?
ReplyDeleteanyword on the ETX sale?
ReplyDeleteIt is outrageous to me that re-payment of bank loans would be made ahead of clients deposits.
ReplyDeleteRAV thanks for the update:
ReplyDeletePlease can you clarify the payout process as I though the company payed out first from the POOL of monies and any then FSCS paid out upto 50K of remaining losses. The article above has it the other way around. This seems to make a difference to the actual amounts recovered.
any chance of an example for a 200K account and 1/3 of monies recovered. How much would you expect to get back in this situation.??
Thanks
FSCS pays out £50,000 to you first.It then recieves any distribution from KPMG.In the case of a £200k client and 1/3 recovery KPMG will pay the FSCS £83,333 which the FSCS will pay out to you in full.The FSCS will pay out all distributions it recieves until you are made whole, in this case £200,000.It would only keep distributions above this.
ReplyDeleteHi thanks for the reply, so in the above example the client would expect to receive £133,33k of their 200k ?
DeleteSorry, it would be £50,000 plus £66,666
Deleteso £116,666
Thanks the mechanics of the payout are now clarified :-)
Deletewhat is to stop the FSCS commencing payouts asap. Why wait until September?
Yes, I think there is still some confusion about when the FSCS pays out. I don't think they have to wait until KPMG make their up to 50k distributions do they?
DeleteI called FSCS last week and basically had a long conversation where the representative used an enormous number of words and said nothing of any meaning.
He said they were waiting for information from KPMG. I said well KPMG issued final statements many weeks ago and surely this is the information needed. The reply there is other information needed as well such as how the company was structured. I asked what did they need to know about the Company structure. Again FFCS couldn't be more specific than this.
you would get £50k plus £83,333.
ReplyDeleteIt would be £66,666 not £83,333
ReplyDeleteI have had over 20 emails regarding from various ws clients who are so depressed hearing the dates of september.A client was in tears due to this whole situation.I will try my level best to do what I can to voice the opinion of all of these clients and am going to setup a meeting with someone in the next week to try and see what can be done.
ReplyDeletePlease note we have to come together at this stage and not sit back and wait for these various individual bodies to make us wait for our money!!!!!
Take care all
God bless
I will try my level best to work with you and get some results ASAP
Cheers RAV, how is it you were at the KPMG and creditors meeting today (Yesterday) ?
ReplyDeleteI guess that 5 million that RBS are claiming would make a huge difference to the level of payouts taking it it from around 30% to 50% of client funds.
ReplyDeleteIf the money is reclassified as client money then yes the payout rises to 50%
DeleteIn terms of the money that KPMG declare is currently too difficult to declare as client money then perhaps they need to go back to school.
ReplyDeleteAside from the fact that that £25m has clearly been taken out of segregation there is the Company statement in Feb 201.
In February 2012 Worldspreads declared they had 7m Euros. Call that £5m (or much lower) after cash burn and currency conversion by they time they went into admin. So that £11m they say can't be identified as definitely belonging to clients (how convenient!) needs to be reduced to £5m for starters and a MINIMUM of 6m should be put into segregated accounts immediately. So, on that basis, right now there should be at least £11m in the segregated account available for distribution to retail clients.
So it seems that KPMG will be collecting further fees for exploring and confirming the obvious that monies outside of segregation belong to clients.
If they are don't belong to clients then where is the missing money and why have no arrests been made?
If the accounts are such a mess that they can't even see the obvious then what have Ernst and Young got to say about this?
Another point is that we talk a figure of £30m being used as the basis for pro rata distribution from segregation but, unfortunately for professional clients, that figure needs to be reduced as they will be unable to benefit from segregated account distribution. So if all money was restored it could be a total of £16m in segregation but the client money qualifying for distribution might be nearer £25m than £30m. Not very nice for professional clients but a fact nonetheless and hopefully all (including professionals) will be made whole by legal action.
Of course KPMG fees will eat into that 16m but if all monies were put back into segregation then even taking into account fees then there could be a 50% distribution if the absence of pay out to professionals and other general creditors is taken into account.
Clearly it's not in KPMG's interest to declare that all the money remaining is 'client funds' since there would be no money left to pay their fees.
DeleteSecondly, if WS have been ignoring the client money rules for several years then the chances are that it wasn't just a few cash transfers (between the client funds account and the main company account) which resulted in the client funds being fraudulantly used to run their actual business. On that basis it makes it quite hard to work out whose funds are whose. For example, if clients won money was that money ever moved into the client funds account as the rules required? Reading between the lines, RBS could easily claim that WS's problems were systemic and had been present for several years and therefore the monies had never been deposited by WS into the client funds account. You can clearly see strong arguments from both sides here. Of course, the only people who really know are the directors and I cannot see too many of them rushing to implicate themselves in a multi-million pound fraud where clients have gone the loser - they'd be hung out to dry.
When clients paid money to worldspreads it was always recieved by a client account.The RBS bank account that they put on their website to recieve money was a client account and the funds received by cards was also into client accounts.It would just be too obvious to the FSA, Auditors and indeed the bank if clients were asked to deposit funds directly into the company bank accounts.Look at any payments you made to ws and you will see it is named as a client account.
DeleteAll money recieved was into a client Trust account.
It is just the company then transfered it into its own accounts.
It just cannot be rocket science to see those transfers.There should have been £29m in those accounts.There was actually only £5m.
There are no good arguments that either KPMG or the banks can make to claim that money.
It was obviously stolen and put in company accounts.
The cash held in the company at the time of Administration was even greater than the company claimed it had in the Feb stock exchange statement!.
Even if KPMG cannot prove the transfers (which I dont know why not) there cannot be many more clear examples of circumstanial eveidence being overwhelming as that.
It is plain obvious that the company was in fact losing money and the Directors were helping themselves to client money to make up the shortfall.
The real reason KPMG dont want to delare all money as client money is because they dont want a fight with RBS.
If WS didnt deposit funds into the client accounts when the client won, then WS still owed that money.Just because WS didnt pay the winnings into a client account doesnt mean that they dont owe the money.
DeleteIf I cancel a direct debit for my gas, and dont put money into the gas companys account as I should do, it doesnt mean I dont owe them the money.
Any way you look at it ALL the money at WS in any bank account is owed to the client accounts.
All money deposited into WS was from a client and all winning bets are monies owed to client accounts
What most people's posts seem to be missing is the fact that WS having being paying out winning clients who have been physically withdrawing funds rather than letting the winnings stack up in their account. This is surely where most of the 'missing' money has gone? The fact is that they have hidden this by the use of fraud (in their accounts submissions).
DeleteThe real truth is that 'organic growth' in this business would take many many years and therefore the directors have a choice to make between offsetting client trades or betting directly against the clients (or a combination of both). In simple terms their strategy becomes higher risk. In this particular case, after a period of time, the company were clearly losing money but didn't want to make that fact public as that would cause clients to withdraw funds and thus make the problem even worse probably forcing them bankrupt. They only remaining course of action was fraud!
I'm still confused having read all I have found. I am owed 61k. Will I get back 50k from FSCS and then 30to50% of the remainder or will I get all of 61k back eventually assuming the % returned stays above 25%?
ReplyDeleteYou will get back all your £61k.
DeleteThe fscs effectively covers your first £50,000 of losses.
So you will be made whole.
Assuming 30% revovery, KPMG will pay £18,300 to the FSCS who will pay £11,000 on to you in addition to their £50,000.
On Fri, Nov 25, 2011 at 1:37 PM, Rebecca Schween wrote:
ReplyDeleteHi Peter,
Thanks for your email and for sending over the documents.
We have reactivated your existing account as discussed.
Your log in details are:
USERNAME: 102712
PASSWORD: will be sent in a separate email
Extract from Worldspreads email on where to send funds. Note RBS segregated client account details.
Do RBS have questions to answer in all this ?
I can also confirm a EUR account has been added to that trading account.
Please find the bank details for our EUR bank account below:
Royal Bank of Scotland
WorldSpreads Ltd Client Segregated Account
IBAN: GB78RBOS16107010075784
SWIFT: RBOSGB2L