Last updated 22 March 2012
Q. What is a special administration?
A. The Investment Bank Special Administration Regulations 2011 (“Special Administration Regulations”) were introduced in an attempt to improve the process where an investment bank fails. In part, the Special Administration Regulations are an attempt to learn lessons from the failure of Lehman Brothers and the administration of Lehman’s European business. In many respects a special administration is very similar to an ordinary administration. As such, it is subject to the supervision of the English High Court in London. However, some of the differences are set out below:
A) The special administrators have to pursue three objectives (although the order in which they appear is not important):
B) If there are insufficient securities in a particular stock line in an omnibus account to meet all valid proprietary claims to that stock line, clients will bear the shortfall pro rata and have an unsecured claim for the balance. Due to the accounting irregularities that have been discovered, it is likely that there will be a shortfall to clients. One of the immediate priorities of the special administrators will be to investigate and attempt to reconcile all client positions in order to establish the extent of the shortfall.
As in an ordinary administration where sufficient realisations are made to enable dividends to be paid, in due course, the special administrators expect to pay dividends to unsecured creditors who submit proofs of claim by the last date for proving (which has not yet been set).
C) A creditors’ committee can be established to assist the special administrators to fulfil their functions. Membership may include both creditors and clients with proprietary claims only. A committee of between 3 and 5 members will be formed at an initial meeting of creditors to be held as soon as is reasonably practicable and, in any event (absent an order of the Court extending time), within 10 weeks of the date on which WorldSpreads Limited went into special administration.
D) The costs and expenses of dealing with and distributing client assets are paid out of client assets. Other costs and expenses are paid out of the investment bank’s assets.
Q. Which business does the special administration cover?
A. WorldSpreads Limited has been placed into special administration. WordSpreads Limited has local registered MiFID branches in Denmark, France, Germany, Ireland, Spain and Sweden, offices in Israel and Portugal and exclusive arrangements with Tied Agents in Greece, Hungary and Slovenia. The main functions of these branches, offices and Tied Agents was to advise WorldSpreads’ London-based management on local marketing/advertising campaigns, provide seminars/training and assist prospective clients. The staff/individuals did not provide advice or otherwise receive/transmit orders/trades.
No other companies in the group are covered by the special administration order and the special administrators are not able to advise on matters to do with them. Clients/creditors of any other businesses should speak to their usual contact.
Q. Do Worldspreads Limited trade under any other names?
A. Yes – Worldspreads Limited had entered into ‘white label’ agreements with a number of third parties to provide financial spread betting services on their behalf.
Customers could have been trading with Worldspreads Limited if they had financial spread betting accounts under any of the following names:
Q. Was the accounting irregularity fraud?
A. The special administrators can’t comment on alleged fraud. The special administrators have to produce a report into the conduct of the directors in the run up to their appointment. This report, however, is confidential and submitted to the Department for Business, Innovation and Skills.
If you wish to advise the special administrators of any matters please write to Samantha Bewick/Jane Moriarty, KPMG LLP, 8 Salisbury Square, London EC4Y 8BB.
Q. What does this mean for clients with open positions/cash balances?
A. All clients with any open positions will have their position closed out as at the close of the markets on Friday 16 March 2012.
Q. I would like to close my account now and have the funds remitted to me – can you action this?
A. The Company is currently unable to action requests for withdrawals from client accounts. If you held an account that had a cash balance at the date of appointment you will be required to follow the claims process in order to receive a distribution for amounts owed to you. Details of the claims process will be published on this website shortly. Unfortunately we are unable to provide any further details on possible timings or the quantum of any distributions at this time.
Q. I am a shareholder, can I trade or sell my shares?
A. WorldSpreads’ shares were suspended on 16 March 2012 and remain so. Further information with regards to shares will be published on the website shortly.
Q. Can I make a claim to the Financial Services Compensation Scheme (FSCS) for amounts owed to me by WorldSpreads?
A. The FSCS is the compensation fund of last resort for customers of authorised financial services firms. It protects private individuals and small businesses if an authorised firm becomes insolvent and cannot return money or investments to its customers. For eligible claims, the FSCS can pay up to £50,000 in compensation per person. If claims are paid by the FSCS, the FSCS will then assume those client claims against WorldSpreads Limited.
The special administrators will work with the FSCS to determine the position. Further updates will be given as this process continues but at present no further information can be given.
Q. Where should I direct further queries?
A. A mailbox has been set up for those affected by the special administration of Worldspreads Limited (firstname.lastname@example.org) and very high volumes of correspondence are currently being received. This mailbox is being monitored by the Joint Special Administrators staff and they will endeavour to respond to queries received within 7 days of receipt.