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Collapsed DFM’s administration bill nears £2m

Fees for administrators handling the collapse of discretionary fund manager Strand Capital are approaching £2m, the administrators’ latest report reveals.

The document shows that the two firms working to return clients’ investments – Smith & Williamson and LA Business Recovery – have now racked up 4,709 hours on the project, at a total cost of £1.96m.

So far, the administrators have taken nearly £400,000 of those fees, with the rest yet to be drawn by the firms.

This does not include a further £73,800 in pre-administration costs paid to the administrators and other advisers such as law firms which are also unpaid at this stage.

However, there is good news on the horizon for clients of the shuttered DFM, which was placed into insolvency in May last year with around £86m in client assets spread across 3,000 customers on its books.

The administrators say they expect more money to be returned to Strand customers in February, once a court and creditors committee has approved their plan.

Only one corporate client has so far failed to agree a client money and custody statement with the administrators.

No court date had been agreed at the time of writing the report.

An interim distribution of client money will be paid “in the near future”, however, once account details have been received from a handful of clients, with the administrators noting that since most clients will have received some funds from the Financial Services Compensation Scheme already, most of these distributions will go to the FSCS initially.

The report details around £5.8m in FSCS payments that have already been returned to clients.

However, the report suggests that claims managers may have tried to approach Strand clients promising faster repayments.

The report reads: “The joint special administrators are aware that certain parties have been contacting underlying clients, claiming that they are able to expedite the return of their assets. Given the process to be followed, this appears to be an unlikely scenario.”

While the administrators say they have concluded there is no shortfall in client money or custody assets, this is dependent on continued confusion over a bond coupon from Optima Worldwide Group, which acquired Strand in 2014, being resolved.

The administrators say in their report that £491,000 in bond interest due in 2016 has yet to be paid.

While Strand is still owed £121,000 for services provided before it went under, the administrators warn that, if the continuing interest on the bond is found to be Strand’s responsibility, then a shortfall in client money would exceed those management fees.

The administrators note that, after further investigation of Strand’s accounts, some of its £349,000 in book debts may also still be due.

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Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. Wow, I’m in the wrong business. Figures suggest the administrators are charging over £400 per hour!

  2. Something is wrong. So in reality no client assets or funds were in jeopardy. However, the administrators have charged £2million to arrive at this conclusion. So… had the client book been sold the day before administration (and for a sum) then there would be little to administer albeit any ‘loss’ from specious investments would be made good by the FSCS. There is more than a degree of immorality involved here.

  3. 4,709 hours!!?? Assuming 8 hour working days, that’s (almost) 589 days solid, to the exclusion of all else, or nearly 2½ years worth of man hours.

    Doesn’t look right to me.

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