Tenth progress report

30 Pages·2017·0.52 MB·English

Joint Special
Administrators’
final progress
report for the
period 18
September
2016 to 17
March 2017
WorldSpreads Limited – in
Special Administration
5 April 2017
Document Classification - KPMG Public
Notice: About this Report
This Report has been prepared by the Special Administrators of WorldSpreads Limited (in
special administration), solely to comply with their statutory duty under Rule 220 of the
Investment Bank Special Administration (England and Wales) Rules 2011 to provide
creditors and clients with a final update on the progress of the special administration and
for no other purpose. This Report is not suitable to be relied upon by any other person, or
for any other purpose, or in any other context.
This Report has not been prepared in contemplation of it being used, and is not suitable to
be used, to inform any investment decision in relation to the debt of or any financial
interest in WorldSpreads Limited (in special administration).
Any estimated outcomes for creditors and clients included in this Report are illustrative
only and cannot be relied upon as guidance as to the actual outcomes for creditors, clients
or other stakeholders.
Any person that chooses to rely on this Report for any purpose or in any context other
than under Rule 220 of the Investment Bank Special Administration (England and Wales)
Rules 2011 does so at its own risk.
To the fullest extent permitted by law, the Special Administrators do not assume any
responsibility and will not accept any liability in respect of this Report to any such person.
Samantha Rae Bewick is authorised to act as an insolvency practitioner by the Institute of
Chartered Accountants in England and Wales. David John Standish is authorised to act as
an insolvency practitioner by the Insolvency Practitioners Association. They are bound by
the Insolvency Code of Ethics.
The Special Administrators act as agents for the Company and contract without personal
liability. The appointments of the Special Administrators are personal to them and, to the
fullest extent permitted by law, KPMG LLP does not assume any responsibility and will not
accept any liability to any person in respect of this Report or the conduct of the special
administration of WorldSpreads Limited (in special administration).
Document Classification - KPMG Public
Contents
1 Executive summary 1
2 Special Administrators’ Proposals 2
3 Special Administration objectives and strategy 2
4 Progress of the special administration 2
5 Estimated outcome for clients and creditors 5
6 Other matters 7
7 Conclusion of the special administration 7
Appendix 1 Statutory information
Appendix 2 Special Administrators’ receipts and payments accounts
Appendix 3 Special Administrators’ time costs, overview of fee agreement
and schedule of charge-out rates
Appendix 4 Schedule of expenses
Appendix 5 Summary of Special Administrators' proposals
Appendix 6 Glossary
See Notice: About this Report. All rights reserved. © 2017 KPMG LLP, a UK limited liability partnership and
a member firm of the KPMG network of independent member firms affiliated with KPMG International
Cooperative, a Swiss entity. All rights reserved.
1 Executive summary
This Report has been prepared in accordance with Rule 220 and covers the period from
18 September 2016 to 17 March 2017. This is the Special Administrators’ final progress
report.
We paid a dividend to unsecured creditors, which included clients in respect of their
shortfall in addition to the 18.418p already declared and paid, and made a final
distribution to the secured creditor. Further information is set out in section 5.
All matters within the special administration have now been dealt with and we have
cancelled the Company’s FCA registration.
We submitted an application to Court in February 2017 regarding closure of the special
administration. Our application was heard on 6 March 2017 and we obtained an Order
for our appointment as Special Administrators to cease to have effect upon the
registration by the Registrar of Companies of the final progress report. In addition we will
also be discharged from liability with effect from 28 days after the date on which our
appointment ceases to have effect.
We have filed a copy of this Report with the Registrar of Companies together with the
requisite form. The special administration will cease to have effect when the Registrar of
Companies registers these documents. The Company will be dissolved three months
after that date.
A copy of this Report, as well as previous reports, and the Court Order referred to above
are available on the website: www.kpmg.co.uk/worldspreads.
Samantha Bewick
Special Administrator
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a member firm of the KPMG network of independent member firms affiliated with KPMG International 1
Cooperative, a Swiss entity. All rights reserved.
2 Special Administrators’ Proposals
As previously advised the Special Administrators’ Proposals were approved, without
modification, at a meeting of creditors and clients held on 23 May 2012. A creditors’
committee was formed: see section 6.1.
A copy of the Proposals is available at www.kpmg.co.uk/worldspreads, with a
summary provided in Appendix 5.
3 Special administration objectives and
strategy
Regulation 10 sets out the statutory objectives of the special administration:
a) Objective 1 is to ensure the return of client assets as soon as is
reasonably practicable;
b) Objective 2 is to ensure timely engagement with market infrastructure
bodies and the Authorities pursuant to Regulation 13; and
c) Objective 3 is either (i) to rescue the investment bank as a going concern or (ii) to
wind it up in the best interests of the creditors.
We confirm that the FCA did not give any direction under regulation 16 requiring us to
prioritise one or more special administration objectives.
We pursued all three objectives simultaneously during the special administration.
With regard to Objective 3, as there was no reasonable prospect of rescuing the
Company as a going concern, we pursued Objective 3(c)(ii) to wind up the Company
in the best interests of the creditors.
All matters within the special administration have now been dealt with and the
objectives above have been achieved. Accordingly we applied to Court and obtained
an Order confirming we may seek our release and exit the special administration via
dissolution.
4 Progress of the special administration
4.1 Asset realisations
Realisations in the reporting period are set out on the attached receipts and payments
accounts. (Appendix 2)
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a member firm of the KPMG network of independent member firms affiliated with KPMG International
Cooperative, a Swiss entity. All rights reserved. 2
Realisations in the client estate (segregated assets) relate to the realisation of the
remaining securities held on behalf of three clients. One of these clients provided
instructions; one client confirmed we may realise these assets and put the proceeds
towards realisation costs and the remaining client did not provide us with any
instructions in relation to their securities during the course of the special administration
despite our attempts to contact them. We disposed of their securities in accordance
with the legal advice we received.
Realisations in the house estate (non-segregated assets) include bank interest
received on balances held in the special administration estate accounts and a small
surplus, to put towards costs, from the client estate.
4.2 Regulatory matters
4.2.1 The Financial Conduct Authority
We continued to liaise closely with the FCA (previously the Financial Services
Authority) in relation to a number of matters throughout the special administration
which included our work relating to client money and assets, compliance with FCA
rules and Know Your Client regulations.
We continued to co-operate with the FCA in all matters where it was necessary or
desirable for the purposes of the special administration.
Once all client related matters had been concluded and the client money bank account
closed we submitted an application to the FCA to cancel the firm’s regulated activities.
4.2.2 The Financial Services Compensation Scheme
The FSCS is a statutory compensation scheme which may, among other things,
compensate eligible parties who have lost money as a result of the insolvency of a
regulated entity.
We have now concluded our work with clients who have contacted us to agree any
final balances. As previously advised, we have worked closely with the FSCS during
this special administration and we have liaised with them in relation to the final
position regarding client claims from the Special Administrators’ perspective.
Client creditors who have not yet received compensation from the FSCS remain
entitled to claim compensation from the FSCS in respect of their loss for the remainder
of their agreed account balance up to their limit of £50,000 per person.
The FSCS is contactable on [phone] should clients have any queries in
this respect.
4.3 Costs of realisations
Payments made in this period are set out in the receipts and payments accounts
attached as Appendix 2.
The schedule of expenses attached at Appendix 4 details the costs incurred, whether
paid or unpaid, in the reporting period. All figures are shown net of VAT.
Creditors and clients are advised that, within 21 days of receipt of this Report, a
creditor or a client may request additional information about the Special Administrators’
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a member firm of the KPMG network of independent member firms affiliated with KPMG International
Cooperative, a Swiss entity. All rights reserved. 3
remuneration and expenses as set out in this Report. A request must be made in
writing, and may be made either by a secured creditor or by an unsecured creditor
with the concurrence of at least 5% in value of unsecured creditors (including himself),
or by a client with the concurrence of at least 5% in value of the client assets
(including himself) or the permission of the Court, in accordance with Rule 201.
In addition, under Rule 202, any secured creditor, any unsecured creditor or any client
with either the concurrence of at least 10% in value of creditors or clients respectively,
or with the permission of the Court, may apply to the Court to challenge the quantum
of remuneration charged, the basis of remuneration or the expenses incurred by the
Special Administrators. Any such application must be made no later than eight weeks
after receipt of the first report which reports the charging of the remuneration or
incurring of expenses in question.
The full text of Rules 201 and 202 can be provided on request by writing to the Special
Administrators at KPMG LLP, 15 Canada Square, London E14 5GL.
4.3.1 Special Administrators’ remuneration
The statutory provisions relating to remuneration are set out in Rule 196. Further
information is given in the Association of Business Recovery Professionals’ publication
A Creditors’ Guide to Administrators’ Fees, a copy of which can be obtained at:
https://www.r3.org.uk/what-we-do/publications/professional/fees
However, if you are unable to access this guide and would like a copy please contact
Deanna Shore on [phone].
Attached as Appendix 3 is a detailed analysis of the Special Administrators’ time spent,
together with charge out rates, for each grade of staff for the various areas of work
carried out for the period 18 September 2016 to 17 March 2017, as required by the
Association of Business Recovery Professionals’ Statement of Insolvency Practice No.
9.
In the period 18 September 2016 to 17 March 2017, the Special Administrators and
their staff have incurred time costs, at rates agreed by the creditors’ committee, of
£112,275 representing 385 hours at an average hourly rate of £292. This includes
work undertaken in respect of tax, VAT, forensic, health and safety and pensions from
KPMG in-house specialists.
The creditors’ committee determined the basis on which the Special Administrators’
remuneration is to be fixed. As reported, the creditors’ committee passed a resolution
fixing the basis of the Special Administrators’ remuneration, in accordance with Rule
196, by reference to time properly given by them and their staff in attending to matters
arising in the special administration at KPMG charge out rates that reflect the
complexity of the assignment. These include the costs of KPMG in respect of tax, VAT,
forensic, health and safety and pension advice provided to the Special Administrators.
In view of the nature of our ongoing work in this special administration, we
subsequently reached a revised agreement with the creditors’ committee in relation to
remuneration. Full details were set out in our Report dated 22 March 2013, with a
summary included in Appendix 3 of this Report.
As previously reported, we subsequently agreed our final fees with the creditors’
committee based on previously agreed rates in relation to this special administration,
subject to any unforeseen matters arising.
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a member firm of the KPMG network of independent member firms affiliated with KPMG International
Cooperative, a Swiss entity. All rights reserved. 4
In accordance with this agreement, in the period we have drawn fees, excluding
expenses, of £28,271.82 from the house estate in relation to agreeing claims and
distributing the prescribed part.
No further remuneration will be drawn.
4.3.2 Client estate
As mentioned above, payments from the client estate include the transfer of residual
realisations from the disposal of the remaining securities to the house estate. These
funds have been put towards meeting client related costs.
Additionally we have transferred the balance of unpresented client dividend
distributions of £35,631 to the Insolvency Services Account. More details are provided
in section 5 below.
4.3.3 Legal fees
During this period we have paid legal costs, including disbursements, of £20,173 from
the house estate. This cost relates to advice received from ReedSmith in connection
with ongoing matters as well as in relation to our application to Court.

4.3.4 Other costs
Other costs incurred in the period are detailed on the receipts and payments accounts
attached and are self-explanatory. The figures are shown net of VAT. It should be
noted that the Company is not registered for VAT purposes and therefore the VAT
incurred across both house and client estates in the period of £11,712 is not
recoverable.
5 Estimated outcome for clients and
creditors
5.1 Clients
Agreed final client balances total £28.7 million.
During the special administration we have paid and declared three client dividends
totalling 18.418p in the £.
Clients also had an unsecured claim against non-client money and assets for any
shortfall in the return to them from client money. Accordingly clients received a dividend
from this source as indicated in section 5.2 below.
Clients should note that if they have received compensation from the FSCS, all rights to
their claim in the special administration are legally transferred to the FSCS. The FSCS
claimed in the special administration for the whole of the clients’ loss (even if that is over
£50,000). Dividends paid by the Special Administrators relating to clients’ balances
where their claim has been assigned to the FSCS were paid directly to the FSCS. For
those clients who assigned a balance of more than £50,000 the FSCS will pay the
dividend on to these clients, up to the client’s account balance.
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a member firm of the KPMG network of independent member firms affiliated with KPMG International
Cooperative, a Swiss entity. All rights reserved. 5
Clients who had not assigned their claims to the FSCS received their dividends from the
Special Administrators.
We have now closed the client bank account and have transferred all unclaimed dividend
amounts to the Insolvency Service. Clients who did not present their dividend cheques
will need to contact the Insolvency Service directly to obtain the dividend distributed to
them. The Insolvency Service can be contacted on 0121 6984268 or by email at
6 Other matters
6.1 Creditors’ committee
As advised in our last report, the creditors’ committee was no longer validly constituted
as the number of committee members fell below three, being the minimum number of
members required for a valid committee. As the special administration was nearing its
conclusion we did not fill the vacancy.
Prior to then, we had a creditors’ committee throughout the special administration, made
up of two classes of voters, namely creditors and clients.
All committee members signed a non-disclosure agreement so that we were able to
discuss the findings of our investigation into the Company’s pre-appointment affairs in
more detail with them.
Additionally, as advised in section 4.3.1, the committee fixed the basis of the Special
Administrators’ remuneration and agreed the quantum.
6.2 Communication
The website, www.kpmg.co.uk/worldspreads, has been updated with information as well
as circulars to clients and creditors during the special administration.
Please be advised that the dedicated e-mail address for enquiries will no longer be
monitored. We have provided contact details for the Insolvency Service regarding
unpresented dividend cheques and the FSCS for clients who have not as yet assigned
their claim and may wish to do so.
Rebecca Lewin is contactable on 0207 311 4878 for any clients with queries that cannot
be addressed by either the Insolvency Service or the FSCS.
7 Conclusion of the special
administration
We submitted an application to Court to end the special administration in February
2017. This application was heard on 6 March 2017 in the High Court in London. The
Court granted the Order sought, thereby confirming that we may cease to act; that the
balance of funds available for distribution to clients and unsecured creditors, namely
unpresented dividend cheques, be transferred to the Insolvency Service (operated by
the Secretary of State); and confirmed the position regarding our discharge from liability.
A sealed copy of this Order is available on our website: www.kpmg.co.uk/worldspreads.
We have filed a copy of this final progress report with the Registrar of Companies
together with the requisite form.
See Notice: About this Report. All rights reserved. © 2017 KPMG LLP, a UK limited liability partnership and
a member firm of the KPMG network of independent member firms affiliated with KPMG International
Cooperative, a Swiss entity. All rights reserved.
7