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Administrators detail litany of failures at collapsed DFM

Directors were unable to reconcile client assets or give access to trading platforms as administrators connect British Steel firm to collapsed DFM

Slipping through the cracks 620x430.jpgAn administrators’ report has shed light on a host of failings that led to the collapse of discretionary fund manager Strand Capital.

London-based Strand, which had around 3,000 clients and £86m in funds under management, was put into special administration back in May.

An administrators report released today shows that IFAs are being contacted, along with Sipp providers, to verify each of their individual holdings, after a director was unable to give the administrators a list of assets held or client names.

The administrators say they understand that commission payments are due to Strand, but have not been able to value the amount.

They have also not been able to identify who two Euro bank accounts worth just over €6,000 belong to or what they are for.

Strand had insufficient funds to pay the premiums in the run up to its collapse, so could not extend its professional indemnity insurance to cover claims in administration.

The administrators add that they have been in regular contact with the FCA Financial Services Compensation Scheme. If clients do not end up receiving the entirety of their investment back in the administration process, the shortfall will be automatically funded by the FSCS up to its £50,000 limit.

At one point in the run up to the administration, “nobody remained in the business who had logon details to the trading platform,” the report reads.

Inside a DFM administration

Asset management conglomerate Optima Worldwide Group purchased Strand in 2014, and 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 tailed off “as alternative investment products were introduced by the company” the administrators say.

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

The administrators also note a link with Kent-based DFM Gallium Fund Solutions. As reported yesterday, Gallium is also linked with a number of high-risk British Steel Pension Scheme transfers.

The administrators report reads: “At the time of the appointment, circa £8.5m of funds was not fully under the control of the company. This was of concern, and considerable resource was dedicated to regularising the position. This involved liaising with a number of banks and other parties, including Gallium. The position of funds has now been regularised.”

Gallium is not mentioned anywhere else in the 45-page report.

Cost incurred by those working on the administration up to the point the company formally entered liquidation alone have come to more than £245,000. These will be paid out of client assets. Between 17 May and 16 November last year, at least half a million pounds in time costs were incurred.

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. Makes you wonder too that regardless of the things that went-on if the losses clients might have incurred in the mess (except investment losses which are a different thing) exceed the £500,000 of costs incurred by the administrators meantime….

  2. I think there’s a bit more to come out yet. All sorts of conflicts of interest, and a peculiarly strange attitude by OWG to it’s feeder fund subsidiary.

    Let’s get the tin opener out and look into the contents of these bonds.

  3. So much for an orderly wind-down. There should have been sufficient capital to ensure key staff were retained to run down the business and make sure sufficient access was maintained to reconcile and transfer the business or return the assets to customers.

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