Advisers are angry at administrator Carter Backer Winter’s move to deduct money from client accounts to cover admin costs for the insolvent structured product provider Arc Capital & Income.
CBW received High Court approval to deduct around 3 per cent from income and capital held in segregated client accounts between its appointment as administrator on October 26 and November 20 when ACI was sold to Merchant Capital.
CBW insolvency practitioner John Alexander says: “£9.5m of client money will go across to Merchant Capital without deduction of any costs. There are monies received by CBW as administrator after its appointment about another £9m which it needs to distribute rather than Merchant Capital and there are costs involved in doing so. We cannot use third-party creditors’ funds to cover those costs, they have to come out of the costs of dealing with so-called trust assets.”
Lowes Financial Management managing director Ian Lowes says: “It is wholly unreasonable that people whose money came into the client account at that time are the ones that have to pay for the administration for everyone.
“This has serious longterm implications for all investment houses and IFAs who have client accounts because it means that a client account is not sacrosanct.”
Whitechurch Securities managing director Gavin Haynes says: “It might only be 3 per cent but it should not happen. We have our own nominee accounts that hold client money which are ringfenced and for clients’ peace of mind it is essential there are controls in place to ensure that.”
An FSA spokesman says: “Expenses may be deducted from the distribution of monies received during the administration this is normal practice. In this area, the administrators are acting under insolvency law as officers of the court.”
A spokeswoman for the Financial Services Compensation Scheme says: “We are in discussions with the FSA regarding the administrators’ proposed treatment of client assets. If there is a potential loss to investors, the FSCS will then consider whether it can deal with claims. However, we do not have sufficient information to reach a view on this at this time.”