In Administration (Col)

I believe an administrator should be an objective arbiter on behalf of creditors.

That it contains 'a lot of 'spin' of course it did' for me means it fails this professional threshold (very high for insolvency practitioners) and so is not 'excellent'.

There is a risk this morphs into an exercise in letting any misdeeds off the hook.

For example:

The report tells us that CUK was incorporated after the 2014 cut-off to trade with interim permission and seemed to open their portal shortly after submitting their application for full authorisation in 2016 and then withdrawing that submission.

The two years the directors spent researching the sector between incorporation and go-live should have been sufficient to inform them there was a chance of this being deemed illegal (and to be prudent in not over relying on legal advice that conducting unregulated peer to peer activity did not contravene financial regulations).

The fact that Coll followed the FCA guidelines for industry "credibility" is possibly "tacit" recognition of the appropriateness of this regime to their company.

I find it remarkable the directors' appointed administrator makes no mention how they used the credit finance interim permission of a pawn broker on their website to give the impression they did indeed have FCA permissions to trade as a peer to peer company.

They've settled on a line of legal advice of not requiring regulation despite apparent website statements to the contrary and the company rep repeatedly answering forum investors that they were regulated and their full submission was ongoing (as late as end of Jan 2018). To a layman, it seems they were trying to give the impression of being regulated not that they were unregulated.

The FCA has culpability for allowing these directors to continue unregulated. They have 1000s of IPs across the whole financial industry to authorise. They adopt a risk based approach where they address potential systemic risk first. In p2p alone there is a cumulative loan book in the billions and CUK has a tiddly book that would have automatically seen them de-proritised. If there is a need to criticise the amount of resource available to the regulator to undertake this task then we must look at a government implementing department austerity just after the financial crisis that necessitated this change of regulator.

It was the directors that continued to take my money and continued to do so even after preparing what might look like a cover-your-ass administration* and publishing T&Cs to leave the client funds as unsecured creditors just before taking the website down. And they took my money right up until the last minute with additional promotions which raises the obvious question of lawful trading.

There's nigh on half a million in the business bank account and administrator's/directors' pockets. There will be ongoing book income such as exit fees and potential interest spread. If in the final reckoning I had to make a contribution, for example from my interest payments, that may be a worthwhile investment to ensure these directors - or any others - cannot lead to such mis-investments again.

*Edit - information has been posted on DDC regarding fines on more than one occasion for this administrator [Coll DD - Adminstrstion report in full - post #55].

All speculation but here is my scenario of how it could end up;

1. New administrator appointed
2. Col owned funds used up by old administrator/legals
3. Cash in accounts uninvested  returned to investors early in the process
4. New authorised operator selected and loan book transferred
5. The income to the business is £150k per month (assumed split COL business and investors) a declining amount as the loan book runs down, this is the only source of income unless new operator pays fee to buy the loan book
6. Col is viable business but the directors cant operate it. Directors will seek compensation on transfer and lost personal income for duration of administration. It may be that the new operator pays them a declining amount from COL portion of income running down until loans complete or some other deal. Another consideration is that if FCA had somehow allowed COL to continue instead of administration to allow them to comply they would likely have been hit with a significant fine possibly to sink the business. This point would be considered when in regard what the directors get out of this situation
7. Investors capital returned as loan book completes so no loss except any defaults
8. Timescale 6 months at least
9. How is the above to be paid for? The income as noted will pay for the administration, and possibly something for the directors. So no interest for investors for the duration, thereafter interest reinstated for the remainder of the loans duration

Since reading the 'report' I have not taken sides, mainly because I am not a COL lender, but I could easily have been, and participating in this excellent forum really helps to understand the issues and to be a more informed lender in future. Before I read the report I supported the process of the administration and was keen to encourage lenders to have faith in that process. On reading the report, I realised I had been naïve. There are accountants, insolvency experts, regulatory experts, and probably lawyers who are contributing here, but my problem with the report comes from some experience in ways of reading. Not so much what it says, but how it might be received by readers.

It seems to me that, apart from the judgement of the technical content required for the process - which is the domain of elliottm dualinvestors and others, not me - we should look for the purpose of its being made available. Who is it written for and what effect might it be expected to have on the intended readers?

The first duty of the administrator is to the creditors, and this is a (draft leaked?) report to creditors containing proposals. But we are told their are no creditors, and no current insolvency - just inevitable future insolvency because a stop to trade had been enforced by others,  I understand unjustifiably according to legal advice. The next duty is to the company, or effectively the owners, to maximise their assets coming out of this process. The report seems to do its duty there, but the process of appointment and funding disclosed looks to have features of what in other fields would be called a pre-pack administration. The report does not indicate any material difference between the position of the owners and the administrator, and we can assume they communicate effectively, within what is permissible.

So, apart from the owners, for whom is this report written? It seems to be written for the lenders, and the means of it's release to this forum rather supports that. The lenders called for such a report, despite not being creditors of the business (and not wishing to be), and here it is. The report gives the impression that, not only has the business been forced to take this action by the FCA, possibly acting beyond its remit, but also that the FCA is now challenging the administration, in a way which is causing at least delay in resolving the financial issues for lenders. The administrator's proposals are presented as loss-free for lenders. But there is no balanced discussion between the undefined position of the FCA, presented as confused and arbitrary, and  the current administrator.

Within this report, it is clear that sides have been taken, between the current administrator and the owners, and the FCA. On the basis of this report, lenders are invited - by other independent parties - to consider that their best financial interest lies with supporting the current administrator. You take your choice.

Now it may well be that if the FCA had sat this one out, and turned a blind eye to what they presumably consider to be a non-compliant business and administration, that Col lenders could have had a quicker and possibly cheaper resolution. However, FCA will look also at the general position, and might consider that allowing that to happen may set a bad precedent for p2p, and might be concerned that the business may continue or may be sold as a going concern, unregulated, and with the 'tacit' approval of FCA. FCA seem to have moved from the normal 'masterly inactivity' into panic mode where principles are at stake and every resource must be made available.

Page 23 "The ongoing monthly net interest receivable by the Group is in

excess of £150,000" 
Regarding interest retained up front, I dont know perhaps someone does know. On a loan book of £23m interest of excess of £150k is about 8% per annum, which seems to be a low % if it relates to lenders income so perhaps this is the income to COL the report does not say, if it is then this suggests COL interest was not paid up front. If the £150k is not investors income then a call on investors income might be less that I speculated earlier

That they would, should or could is debatable. That they will try, probably needs less thinking about.

I agree. An IP willing to leak this report at all, and for that report to then be laden with unverifiable delicious carrots coupled with rumour of painful financial sticks, aimed squarely at us, makes me very concerned about the interests that are being served and the professionalism of those serving them. 

An IP acting professionally IMV, would have released a short statement (directly, not via stubs!) to the effect that their position as administrators is being challenged and that they or newly appointed administrators will update us once the case is resolved - and that's it.

I rather suspect that the leak may have the opposite effect that was hoped for. I'd imagine the FCA are absolutely fuming about it. I don't see how this could possibly add to their case as being the right outfit for the job.