Godanubis
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Anubis is known as the god of death and is the oldest and most popular of ancient Egyptian deities.
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Post by Godanubis on Apr 30, 2018 20:11:11 GMT
I am just wondering why you would think we would mot come out with anything like 100%. If the loans are all functioning and all the bling and other bits and bobs are still there then why is it not possible. I must admit i dont really understand this bit about the 400k being drawn out of the client account for so called wages or business expenses or whatever they called it. Surely this should not be touched. Does this mean they have stolen this from us?. What sought of % can you see being returned to us and if its anything less than 100% do we have a legal case on our hands to get the rest because i presume we all dont just take this lying down. I can see that the administrators need to take a short term view. If a loan defaults they will not realistically be able to give them more time for a better overall resolution. If the borrowers cannot refinance quickly, then the administrators will need to foreclose and have a fire sale to realise as much return as possible in a short time. This is not conducive to 100% return if the loan has any issues at all. At the rates administrators charge, it may well not be in our interests for them to draw things out longer than they have to. As stated in court case administrator fees are on a fixed scale so should only be what is required to do the job if people will let them get on with it.
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mason
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Post by mason on Apr 30, 2018 20:16:38 GMT
I am just wondering why you would think we would mot come out with anything like 100%. If the loans are all functioning and all the bling and other bits and bobs are still there then why is it not possible. I must admit i dont really understand this bit about the 400k being drawn out of the client account for so called wages or business expenses or whatever they called it. Surely this should not be touched. Does this mean they have stolen this from us?. What sought of % can you see being returned to us and if its anything less than 100% do we have a legal case on our hands to get the rest because i presume we all dont just take this lying down. I can see that the administrators need to take a short term view. If a loan defaults they will not realistically be able to give them more time for a better overall resolution. If the borrowers cannot refinance quickly, then the administrators will need to foreclose and have a fire sale to realise as much return as possible in a short time. This is not conducive to 100% return if the loan has any issues at all. At the rates administrators charge, it may well not be in our interests for them to draw things out longer than they have to. Well yes, but the original statement was based on the premise that there was an offer to purchase the whole loan book by a third party that would be sufficient to repay all capital lent. Seems less likely given some of the facts disclosed at the court hearing.
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hazellend
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Post by hazellend on Apr 30, 2018 21:51:01 GMT
I am just wondering why you would think we would mot come out with anything like 100%. If the loans are all functioning and all the bling and other bits and bobs are still there then why is it not possible. I must admit i dont really understand this bit about the 400k being drawn out of the client account for so called wages or business expenses or whatever they called it. Surely this should not be touched. Does this mean they have stolen this from us?. What sought of % can you see being returned to us and if its anything less than 100% do we have a legal case on our hands to get the rest because i presume we all dont just take this lying down. The money was taken by one of the directors as "business profits" which it clearly was not, resulting in his account being frozen and an asset search being launched. Seems likely to be theft and perhaps not the only instance of it. The FCA have indicated they don't believe a 100p in the pound return for lender-investors is realistic and they probably know more than we do. I believe the FCA do not know what they are talking about. Still nothing to do but wait patiently and see. Wish I didn’t have such a huge sum tied up in this but that’s life
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mason
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Post by mason on May 1, 2018 6:32:19 GMT
The money was taken by one of the directors as "business profits" which it clearly was not, resulting in his account being frozen and an asset search being launched. Seems likely to be theft and perhaps not the only instance of it. The FCA have indicated they don't believe a 100p in the pound return for lender-investors is realistic and they probably know more than we do. I believe the FCA do not know what they are talking about. Still nothing to do but wait patiently and see. Wish I didn’t have such a huge sum tied up in this but that’s life I doubt the judge would have approved the freezing order without evidence, and AC had an opportunity to explain why the money was transferred to his account if it was for a valid reason.
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tx
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Post by tx on May 1, 2018 7:10:48 GMT
I believe the FCA do not know what they are talking about. Still nothing to do but wait patiently and see. Wish I didn’t have such a huge sum tied up in this but that’s life I doubt the judge would have approved the freezing order without evidence, and AC had an opportunity to explain why the money was transferred to his account if it was for a valid reason. So did the C brothers explain in court for what “valid” reason they took the money? And took it straight from client account? By reading the excellent summary on this forum, I didn’t quite get what the C brothers said about what they did.
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blender
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Post by blender on May 1, 2018 7:50:54 GMT
I guess that when they were told that they had no approval, but needed approval and therefore had to close, that they then consulted RR on how to wind things up with the best outcome for them. It seems that they considered that they were owed profits, but that the available cash was client money. To be told that you were not approved and could not trade, but then to preserve client money as if you were operating an approved business, must have looked a tough position. Having the legal advice that they were not running a business subject to regulation might allow them to exit the client money regime, to remove the money they thought they had earned from the available cash - no longer the client account - and for consistency to change the T&C's to reflect their understanding that the client money, money for non-drawn down loans and interest, was a part of business assets and the cash could be used for business purposes, like taking profits. The client's potentially becoming creditors.
This seems to fit events and the best pre-pack practice, though I may have it wrong.
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james21
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Post by james21 on May 1, 2018 8:03:29 GMT
I doubt the judge would have approved the freezing order without evidence, and AC had an opportunity to explain why the money was transferred to his account if it was for a valid reason. So did the C brothers explain in court for what “valid” reason they took the money? And took it straight from client account? By reading the excellent summary on this forum, I didn’t quite get what the C brothers said about what they did. Might be wrong but as I recall the brothers were there as members of the public only. The withdrawal was said to be "part business profit" or words to that effect
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IFISAcava
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Post by IFISAcava on May 1, 2018 8:59:31 GMT
I guess that when they were told that they had no approval, but needed approval and therefore had to close, that they then consulted RR on how to wind things up with the best outcome for them. It seems that they considered that they were owed profits, but that the available cash was client money. To be told that you were not approved and could not trade, but then to preserve client money as if you were operating an approved business, must have looked a tough position. Having the legal advice that they were not running a business subject to regulation might allow them to exit the client money regime, to remove the money they thought they had earned from the available cash - no longer the client account - and for consistency to change the T&C's to reflect their understanding that the client money, money for non-drawn down loans and interest, was a part of business assets and the cash could be used for business purposes, like taking profits. The client's potentially becoming creditors.
This seems to fit events and the best pre-pack practice, though I may have it wrong. But do you have to have FCA permission to run a segregated client account? Surely many non-FCA businesses run such accounts? Important for those of use with some cash on account and money in non-drawndown loans (low four figures on my part).
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dandy
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Post by dandy on May 1, 2018 9:19:12 GMT
But do you have to have FCA permission to run a segregated client account? Surely many non-FCA businesses run such accounts? Important for those of use with some cash on account and money in non-drawndown loans (low four figures on my part). Holding Client Money is a regulated activity that requires permission. If a firm is not authorised to hold Client Money then it is not holding Client Money it is holding money that belongs to clients which cannot be protected by CASS rules. Some may segregate, others may not even do that because there are NO rules other than the specific company t & c's. Happy to be corrected.
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blender
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Post by blender on May 1, 2018 9:53:55 GMT
I guess that when they were told that they had no approval, but needed approval and therefore had to close, that they then consulted RR on how to wind things up with the best outcome for them. It seems that they considered that they were owed profits, but that the available cash was client money. To be told that you were not approved and could not trade, but then to preserve client money as if you were operating an approved business, must have looked a tough position. Having the legal advice that they were not running a business subject to regulation might allow them to exit the client money regime, to remove the money they thought they had earned from the available cash - no longer the client account - and for consistency to change the T&C's to reflect their understanding that the client money, money for non-drawn down loans and interest, was a part of business assets and the cash could be used for business purposes, like taking profits. The client's potentially becoming creditors.
This seems to fit events and the best pre-pack practice, though I may have it wrong. But do you have to have FCA permission to run a segregated client account? Surely many non-FCA businesses run such accounts? Important for those of use with some cash on account and money in non-drawndown loans (low four figures on my part). I am not a sufficient expert on that, but tend to think the same as dandy. I am trying to understand the thinking of the owners, to better understand p2p risks, and it seems to me that the issue of the client money and what can be done is the key. Taking the owners' viewpoint for a minute, if I dare, they may well have considered themselves seriously messed about on the regulatory issue, and presumably had a good business - other than not having approval. So they lose the business because they cannot get approval, and then they stand to lose their profits - considered hard earned - because the cash is held in an account which would be un-touchable if the business were approved. So you must close down because you are not approved, but you must close down in a way consistent with the rules if you were approved. Quite a tough position - if I have it right. The court case suggests so. In extremis, what would you do, wave goodbye to the assets you have built? This is financial services, not a charity. We are all motivated by optimising our assets, within the rules. I am not seeking to justify anything, and hope the new insolvency arrangements get it all back.
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mason
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Post by mason on May 1, 2018 9:54:19 GMT
But do you have to have FCA permission to run a segregated client account? Surely many non-FCA businesses run such accounts? Important for those of use with some cash on account and money in non-drawndown loans (low four figures on my part). Holding Client Money is a regulated activity that requires permission. If a firm is not authorised to hold Client Money then it is not holding Client Money it is holding money that belongs to clients which cannot be protected by CASS rules. Some may segregate, others may not even do that because there are NO rules other than the specific company t & c's. Happy to be corrected. If a firm claims to be authorised and enters into a contract with a third party to hold client money, then it would be in breach of the FSMA 2000 and clients would be entitled to recover any such money under Section 28 of the Act. The action taken by the Court and FCA looks to be in keeping with that.
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pikestaff
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Post by pikestaff on May 1, 2018 10:02:07 GMT
If the principals have taken client money it is theft regardless of whether Collateral was regulated or claimed to be so. With regard to costs, the administrators' fees will be at their scale rates as approved by the Court. This does not necessarily mean that lenders will suffer those fees for the duration of all their loans. The best possible outcome for lenders is that one or more third parties will take over the better loans (let's call it the "good book") while the adminstrators collect the rest. Many of the loans being collected by the administrators may end up being foreclosed (property) or not rolled over (bling), at which point lenders will find out what their security is worth in a fire sale - and, in the case of bling, whether it is still there ![:-S](//storage.proboards.com/forum/images/smiley/wavey.png) .
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nick
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Post by nick on May 1, 2018 10:12:22 GMT
The primary purpose of having segregated client accounts is to show a clear delineation between a firms own funds and client funds that it is holding on trust. In the event of administration/insolvency, the clients will have first claim on segregated funds which will not be deemed part of the general creditor pool. For regulated firms, there are clear rules over the segregation of client funds if these are treated as client money to protect retail investors. However, should a firm not properly segregate funds, then clients will not benefit from this protection irrespective of whether such segregation should have occurred.
The administration of MF Global (the large US/international dealer/broker) was a huge eye opener. In that case, in the last few days prior to administration MF had failed to correctly segregate all client money as required by FSA rules (basically a material amount of client funds received failed to make it into the segregated client account). Resulting court cases between clients/creditors and the administrators confirmed that only funds that were in the segregated account could be treated as client money with the afforded protections and the funds that had yet to be segregated (even though they should have been) were treated as part of the general creditor pool. The bottom line is that client money is only protected from general creditor claims if it has between actually segregated from a firm funds and not whether they should have been which becomes largely academic (clients will have a contractual claim but that pretty useless if the firm is insolvent).
The concern with Collateral is that appears that was a commingling of client and firm funds in the days/month prior to administration, which if is the case, would destroy any segregation and thus protection that may have been place. What is not very clear is the level of general creditors Col had - if it is small, then the impact may be minimal, although the administrator's costs comes out of the creditor pool.
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elliotn
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Post by elliotn on May 1, 2018 10:17:48 GMT
Good point on the bling (my primary asset), if they had nigh on a month to prepare for taking the business profits they were owed not all those closely located safety deposit boxes may still be filled on clients' behalf (if borrowers were allowed to cash in on preferential terms for instance - assuming their misappropriation or even non-existence to be inconscionable) - no mention by RR, hopefully BDO will update as to their security.
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elliotn
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Post by elliotn on May 1, 2018 10:27:25 GMT
Thank you for an(other) excellent post nick. From a layman's view, the CASS rules don't stack up to much if desperate principals could mix monies and thereby obviate their efficacy in the last desperate throes of taking out their due business profits*. (*Could there be criminal sanctions for doing so even if the principals were deemed not to be running a regulated firm requiring CASS rules as the disincentive not to do so?)
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