KPMG Special Administrator of Alpari UK reports compensation payment of 51.3 million 

KPMG, the Special Administrator of Alpari (UK) Limited has issued an update report to inform regarding the progress for the period 19 January 2016 to 18 July 2016.

Below are highlights of the report as it was published.

Executive summary

• This progress report covers the period from 19 January 2016 to 18 July 2016.
• We have focused on all three statutory objectives set out in the Regulations (Section 2 – Progress to date).
• To date FSCS has taken assignment of 12,251 client claims and has paid compensation of USD 51.3 million to 11,751 clients (Section 2.4 – Regulatory Matters).
• We have received regulatory approval to commence the process of closing the CMP, and we will shortly be applying to court for a hearing date (Section 2.4 – Regulatory Matters).
• We have made one interim distribution from the CMP to clients of 55 cents in the USD. Our latest CMP illustrative financial outcome as at 18 January 2016 is available at http://www.kpmg.com/uk/alpari (Section 3 – Dividend prospects and dividends paid).
• As required by the CASS rules, costs incurred in dealing with the client money pool (“CMP”) are to be charged to the CMP (Section 2.5 – Costs).
• Preferential creditors have been paid in full (Section 3 – Dividend prospects and dividends paid).
• A second unsecured dividend of 6 pence in the £ (GBP) was declared on 18 April 2016 and paid shortly thereafter, bringing the total unsecured dividend to 20 pence in the £ (GBP). The timing and quantum of a further dividend to unsecured creditors is uncertain. However, on current information we anticipate the final dividend will be paid during the course of 2017. (Section 3 Dividend prospects and dividends paid).
• Following Mark Firmin’s resignation from KPMG LLP during the period, Edward George Boyle was appointed Joint Special Administrator by Order of the Court with effect from 15 July 2016.
• Please note: you should read this progress report in conjunction with our previous progress reports and proposals issued to the Company’s clients and creditors which can be found at http://www.kpmg.com/uk/alpari. Unless stated otherwise, all amounts in this progress report and appendices are stated net of VAT.

Progress to date

Objectives and strategy of the special administration

The Regulations set out the statutory objectives of the special administration, being;

1. to ensure the return of client assets (being client monies for these purposes) as soon as is reasonably practicable;
2. to ensure timely engagement with market infrastructure bodies and the Authorities; and
3. either to rescue the Company as a going concern or to wind it up in the best interests of the creditors.

There is no priority to the order of the objectives and we continue to pursue all three objectives simultaneously. We prioritise the order of work on each objective as we think fit to achieve the best result overall for clients and creditors.

All funds held in segregated accounts, together with the Company’s client money held in omnibus accounts designated as client monies at banks or exchange/clearing house, were automatically pooled on insolvency. Any client entitled to client money protection is entitled to a share in the pool on a pro-rata basis.

We established that there was no reasonable prospect of rescuing the Company as a going concern within the first two weeks following our appointment. Accordingly in relation to objective 3 we are pursuing the objective to wind up the Company in the best interests of the creditors.

Dividend prospects and dividends paid

Clients

The Claims Portal continues to be available to clients with a claim into the CMP to agree their claim online. To date, 94,364 clients have access to the Claims Portal representing 99.8% by value of clients.

Clients without access to the Claims Portal have not been granted access due to insufficient details being held by the Company. Any clients who do not have access to the Claims Portal, but believe that they should have access, should email alpariukclaims@kpmg.co.uk stating their name and account numbers.

To date, 15,378 clients have agreed their claim representing 95.7% by value of clients with a claim into the client money pool. There are 192 clients who have disputed their claim with a value of USD 1.6 million. We have paid a total of c. USD 51.8 million from the client money pool in respect of 12,480 clients, representing c.53% of the CMP.

We currently estimate total claims into the CMP to total USD 97.8 million. However, as 4.3% by value have not yet agreed their claim in the Claims Portal, this figure may fluctuate.

Following the declaration of a first client money distribution of 55 cent per USD on 30 April 2015, we continue to pay catch up dividends to clients who agreed their claims after the initial date for proving of 31 May 2015, or to those clients for whom we held insufficient details in order to make the payment, for example incomplete bank details.

The Rules require that the costs properly attributable to the distribution of client money are borne by the client estate, which reduces the amount available to clients from the CMP. At present, we estimate that the overall return to clients will be in the range of 78.3 cents to 79.7 cents in the $ (USD): an updated client only illustrative financial outcome is available on the website. In addition, clients will receive a dividend reflecting any shortfall in their CMP claim from the general creditor estate.

The Special Administration has reached a stage where the JSAs can confirm that the next CMP distribution will be the final CMP distribution, which will occur on closure of the CMP.

While we are unable to confirm the exact timing of the final CMP distribution, providing that there are no material ongoing client disagreements at the time, it is anticipated that it can take place in the second half of 2016.

Please note that, prior to being able to announce the final CMP distribution, the JSAs require both regulatory and Court consent. As noted above, the relevant waiver has been received. We have now applied for a Court hearing in order to request permission to close the CMP, after which time the final CMP distribution will be announced.

Clients will be notified of any further distributions and an update will be provided on our website (http://www.kpmg.com/uk/alpari).

Clients should note that if they have received compensation from FSCS, all rights to their claim in the special administration, including to the CMP, are legally transferred to FSCS. FSCS will claim in the special administration for the whole of the clients’ loss (even if that is over £50,000). In accordance with FSCS rules, FSCS will pass on to the client any money it recovers until the client’s total claim is satisfied. Thereafter, FSCS will recover additional amounts to offset the cost of the compensation it has paid the client.

A deficit in client monies will rank as an unsecured claim against the non-client money and assets, and therefore clients will also receive a dividend from this source. Information on the outcome for unsecured creditors is set out below.

Preferential creditors

All preferential creditors have been paid in full.

Unsecured creditors

To date, we have agreed unsecured claims of GBP 16,105,199. A second interim dividend of 6 pence in the £ (GBP) was declared on 18 April 2016, and was paid shortly thereafter to all unsecured creditors with an agreed claim and who had passed the necessary KYC checks.

This second dividend brings the total dividend paid to all agreed unsecured creditors to 20 pence in the £ (GBP). The total amount paid out to date is GBP 3,086,895.

We did not pay the dividend to creditors with a distributable amount of GBP 100 or less, i.e. creditors with a claim value of GBP 500 or less. This was because it is not economical for the body of creditors as a whole to bear the administrative costs of making payments below this level.

Unsecured creditors with an agreed claim but with a distributable amount of GBP 100 or less will be paid when the final dividend is declared, which is expected to be during the course of 2017.

We continue to adjudicate claims and pay catch-up dividends as appropriate.
The timing and amount of further dividends is currently uncertain owing to the commercial sensitivity of a number of variables such as continuing asset realisations and the volume of unsecured claims.

Further details will be provided as significant developments arise.

Joint Administrators’ remuneration and disbursements

The committee have provided approval that our remuneration will be drawn on the basis of time properly given by us and the various grades of our staff according to the charge-out rates.

This resolution was passed with a view to the Special Administrators’ fee structure being considered further with the committee.

Disbursements for services provided by KPMG (defined as Category 2 disbursements in Statement of Insolvency Practice 9) will be charged in accordance with KPMG’s policy.

Following the initial approval to draw a fee on account of £2 million, the committee have since approved the basis of our fees and we have agreed a fee structure with the committee, summarised below.

Future strategy

Future conduct of the special administration

We will continue to manage the affairs, the business and the property of the Company in order to achieve the purpose of the special administration. This will include but not be limited to:

• Realisation of client debtor balances;
• Co-operating with the FCA and other regulatory bodies;
• Closure of the CMP;
• Agreeing client and creditor claims and supplying information on agreed client claims to FSCS;
• Dealing with ongoing statutory and compliance obligations as well as responding to queries raised; and
• Distributions of client money and general estate funds.

Future reporting

We intend to provide a further progress report within one month of 18 January 2017.

For the full report: Alpari (UK) Limited – in Special Administration

Source: KPMG

 

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