One of the unfortunate consequences of having supposedly safe and secure segregated assets taken from clients is that many are too impoverished to take legal action.
There is still the prospect that if the case is clear cut against any of the likely legal targets then KPMG will take action on behalf of out of pocket clients. There are two issues here; firstly, while I confess to only taking a superficial look, I haven't seen any precedent of Administrators taking legal action in other cases.
It appears the usual process is to assign the claim to creditors / clients. Secondly, if the Administrator takes action, then this will deplete further our remaining funds available for distribution and delay payout through the almost inevitably protracted legal process.
My own preference is for the Administrator to provide a clear and detailed report on what has happened and make it available for claimant representatives to pursue a claim. It appears archaic and unjust that effected parties have no automatic right to see such information.
All clients that are left in a position needing to recover funds need to see this report regardless of whether, at this stage, they have the resources to employ solicitors to lobby on their behalf. There cannot be two tiers of information flow to impacted clients.
The hope is that an early report in combination with assignation of the claim to clients could result in an early 50% distribution. That's based on the £16.7m remaining cash announced by Worldspreads and further asset sales with KPMG restricting their fees to around £2m. Of course we await further information on this from KPMG and selling hedged positions could move the figure upwards or downwards.
The alternative if KPMG pursue the claim is a potentially lengthy wait for any funds above 50k to be released. That might be the preference of many. I can see the validity of that point if the case is particularly clear cut and likely to lead to reasonably prompt settlement. In fact, I would favour such a route myself. If, however, the consensus is that a drawn out legal pursuit is on the cards my preference is for assignation of the claim and a reasonably substantive percentage early pay-out.
Clients with over 90k to 100k can then look to externally funded legal options.
The first port of call is to see if a CFA (Conditional Fee Arrangement) is available. One of the purposes of this piece is to call on any solicitors with an inclination to take this on with a CFA charging structure to get in touch with Rav, the blog owner.
The second route is to look at legal funding groups. If the prospects of success are higher than 70% (usually as assessed by a barrister) then there are groups including hedge funds who will fund a high value case in exchange for a whopping 50% of any return.
I hope clients don't have to go down the second route and solicitors I have spoken to who are not inclined to take on CFA cases suggest that there may be some firms who might pursue the claim on a CFA basis.
There is also the scope of expanding the number of clients who pursue legal action to anyone who has lost funds from being out of the market. Worldspreads have the legal right to close our positions under the T & C, however, they also had an obligation to return resulting balances. Accordingly, there may be a case for those that can show that they are long-term position holders who, in the absence of returned balances, have lost simply because they are unable to replace their same positions and mitigate.
If any solicitors are inclined to look at taking this potential case on with a CFA are reading this blog then please do get in touch. Email Rav :- nshah10@hotmail.com
Best wishes and good luck to all,
Nick
