The joint administrator of Pritchard Stockbrokers has begun paying the first interim distribution to clients with frozen cash assets at 50p in the pound.
Mazars was appointed special administrator on March 9 after the FSA suspended Pritchard’s permissions due to concerns about the way it handled client assets and monies.
On the same day, structured product provider Merchant Capital said it would transfer all £350m of clients’ non-cash assets from Pritchard to new custodian Reyker Securities but cash assets were frozen by the regulator.
Pritchard client cash balances, known as “pooled client monies”, which had not been sold prior to the appointment, included over 11,300 client accounts with claims of over £26.5m.
Payments will be made to all clients who have agreed their client cash balances. Around 3,300 claims have been agreed to date, with claims totalling £13.7m. The first tranche of interim distribution payments was issued on 31 July.
Mazars says: “Extensive work has been carried out on pooled client monies, with considerable difficulty being encountered in the reconciliation process. The work agreeing these client cash balances is well advanced and the current estimate is that there may be a shortfall in pooled client monies of approximately £2.8m.”
Mazars has begun negotiating with the Financial Services Compensation Scheme about the shortfall.
The FSCS is to start contacting Pritchard clients about their entitlement to compensation.
Lowes Financial Management managing director Ian Lowes says: “I suspect getting 50p in the pound is a significant underestimate of the amount that will eventually be paid.”