Barrister and former Financial Ombudsman Service adjudicator Jane Sanders is challenging the Isle of Man Depositor Compensation Scheme over its decision to exclude Kaupthing Singer and Friedlander IoM bondholders from compensation payouts.
KSF IoM was wound up in May 2009 and claimants have until November 27 to submit a claim to the DCS. The Isle of Man Financial Supervision Commission, which manages the DCS for KSF IoM purposes, says those who held assets through a bond are not eligible for individual compensation.
FSC chief executive John Aspden says: “Insurance companies are the beneficial owners of the funds, even though behind them stand the policyholders.”
JS Commercial Solutions director Sanders says bondholders retain beneficial ownership of the funds according to trust law, which entitles them to compensation under the Compensation of Depositors Regulations 2008.
She says up to 1,200 bondholders have been prevented from claiming and she is considering legal action. Estimates suggest nearly £400m was invested in KSF IoM through offshore bonds via life offices.
The DCS offers maximum compensation of £50,000 per individual.
Aspden says: “If anybody does not agree with the interpretation, there is a formal process for that to be independently reviewed.”
He says he cannot comment on whether the November deadline would be extended if Sanders’ challenge of the rules is successful but adds that any concerned depositors can submit a claim before the deadline.