While BSAM plans are all administered through KIS, the group says that client assets are held through Keydata Product Nominees Limited, which cannot become insolvent as it has no liabilities, staff costs, cash flow or trading activity and as a result is not dependant on the solvency of Keydata.
BSAM says that client assets are ring-fenced from Keydata Investment Services Ltd.
Investments in BSAM Plans are held in accordance with Client Money Regulations. At the strike date of any plan the assets for any plan – the underlying financial securities – are bought from issuing counterparties which are then held in the name of Keydata Investment Product Nominees Limited for the beneficial ownership of investors.
BSAM says that the risk to capital for investors is not with KIS, but from the solvency of the counterparties providing the assets –the major investment banks that provide the financial securities which deliver the features of any plan.
The solvency of KIS, as the administrator and account manager of any plan, does not impact on the counterparty.
BSAM chief executive Chris Taylor says: “In response to the news that Keydata Investment Services Limited has been placed in administration, following an application to the Royal Courts of Justice, by the FSA, on the grounds that KIS is insolvent, we have provided a swift input to advisers, and investors, in the absence of further details being made available by either KIS or the appointed Administrators, PwC. We have been surprised at the lack of detail and pro-active input provided by either company so far.
“The bottom line is that based on our working knowledge of the account management process involved in structured investments we do not believe client’s investments are at risk in the current situation – as it is the solvency of the counterparties that provide the assets that back structured investment Plans that is the critical factor.
“Clearly there is now a question as to how existing KIS plans will be administered, if the parent company is insolvent but speculation about risks to investors’ cash is ill-informed.
“We would expect an extremely swift clarification of the facts, and the resolution of the ongoing account management issues, to be achievable and sought by all parties.”