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FSCS faces pressure as collapsed DFM’s administrators secure just 65p in £1 for investors

Investors in collapsed discretionary fund manager Strand Capital have got back 65p for every £1 they invested, two years after the firm went into administration.

Claims were paid at the beginning of April, the latest administrators’ report reveals, with more pressure set to fall on the Financial Services Compensation Scheme as it picks up the shortfall.

A second distribution of client money is set to be paid in future, but the administrators estimate there will still be insufficient funds to cover claims.

Through the combination of payments and the FSCS compensation, however, the administrators estimate 97.8 per cent of clients with a client money claim will get their balance paid in full.

The report dated 14 June, which was uploaded to Companies House today, shows that not all investors have claimed back money where Strand was just acting as custodian.

Only 68 per cent provided details of where their client custody assets should be sent, according to the report.

“Almost all clients are eligible to receive compensation from the FSCS” for the costs that the administrators are recovering from their custody asset balances, the report notes.

The administrators decided the fairest way to charge was to take a £2,250 fixed fee per client for custody assets, or the value of the assets, whichever is lower, with 99.5 per cent of members able to claim this back in full from the lifeboat fund.

However, the administrators say it is “unlikely” it will get enough assets back to repay unsecured creditors as well.

Missing coupon payments

The battle continues for investors who held particular bonds through Strand. The administrators maintain that Optima Worldwide Group, which took over Strand three years before it collapsed, owes bondholders nearly £492,000 for interest on a 2016 coupon which has not been included in the compensation calculations.

Asset management conglomerate Optima purchased Strand in 2014. Previous administrators’ reports have detailed how Optima made an investment into the company to develop an algorithmic trading platform.

This went live in February 2016. Before then, Strand Capital only arranged investments in Optima bonds, but these were reduced as “alternative investment products were introduced by the company” the administrators say.

A company called 5Aplha – also linked to British Steel pension transfers –  provided IT services to Strand, according to the reports. The administrators say that in around November 2016, a “significant portion” of Strand’s investments were moved to the Irish domiciled 5Alpha Adventurous Fund and/or Conservative Fund.

According to the Financial Times, 60 Tata Steel workers had their pension funds transferred into the 5Alpha Conservative and 5Alpha Adventurous funds.

The paper reports that the estimated ongoing annual fees of both funds were above 2.1 per cent.

The paper adds that a client complained to advice firm Active Wealth after having his money invested in the 5Alpha funds through Strand.

“The administrators continue to pursue resolution to [the bond coupon] matter,” they say in the report.

The report adds: “Investigations into matters brought to our attention and more generally in relation to the demise of the company continue. Should any creditor, client or other interested party have any additional information that might assist us with our investigations, please provide that information to us as soon as possible.”

Overall, the administrators have spent at least 5,700 hours on the project, billing nearly £2.5m in costs. A further £526,000 has been racked up by legal advisers on the case.

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. David Stephenson 11th July 2019 at 11:58 am

    £438 per hour for the administrators. Nice pay if you can get it.

  2. Bethell Codrington 12th July 2019 at 4:22 pm

    Indeed. £15,330 per 35 hour week. I am in the wrong business …

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