Q&A with Alpari UK joint administrator, KPMG Director Samantha Bewick: Interim unsecured dividend by end of 2015

Almost ten months have elapsed since the passing of several FX companies whose existence became casualties of the Swiss National Bank’s removal of the EURCHF pair on January 15 this year which created such an unprecedented wave of volatility that it has become a memorable date, dubbed Black Thursday.

Alpari UK was one of the companies whose exposure to negative client balances signaled the end of the road, and the appointment of KPMG as Joint Special Administrators.

So far, KPMG has conducted a comprehensive and publicly available series of procedures relating to the firm’s insolvency, the latest being a letter to creditors in August this year, however FinanceFeeds has today spoken in detail to Samantha Bewick of KPMG in order to discuss the method by which this procedure has been conducted so far, and to gain her perspective.

Ms. Bewick has worked on the public cases of Barings plc, Marconi plc, TXU (Europe), and was Joint Supervisor of the CVA of Schefenacker plc, as well as being Joint Special Administrator of British spread betting company Worldspreads after its demise in 2012.

She is a Fellow of the Institute of Chartered Accountants in England and Wales and a Licensed Insolvency Practitioner in England and Wales.

You have extensive experience in administration of insolvent firms in this industry, having been Joint Special Administrator for Worldspreads when it collapsed. How did this previous experience translate as Joint Special Administrator for Alpari UK?

Our previous experience meant that we were immediately aware of the likely issues and could draw on previous knowledge to provide a more efficient return of client money, by converting Alpari’s systems into an innovative claim agreement portal which allowed over 100,000 clients access to agree their claims, elect whether to receive compensation from the FSCS, and elect for funds to be paid to ETX Capital.

Had we had to use paper-based, one to one methods, given the geographic spread of clients, it would have taken much longer for clients to agree claims, it would have been much more costly, and we would not have been able to declare a client money dividend, nor would FSCS have been able to pay compensation, nearly as early.

Under the special administration regime we have, we are subject to three aspects. These are to return client funds as quickly as possible, to liaise with the Bank of England, FCA and PRA, and to rescue the business as a going concern or to wind it up in the best interest of creditors. These are not ranked and we pursue them all at the same time. One of our first tasks is to secure the client money.

For something like Alpari UK where there are over 100,000 clients across 100 countries, using the standard insolvency system with proof of debt and letters to clients is not efficient. Our first challenge was to use Alpari UK’s IT staff working with our staff to convert the trading platform into a claims agreement platform.

This avoided a paper-based form, instead allowing customers to log in using existing log in credentials, see exactly what their claim is, conform to KYC and AML rules, and fill in the necessary page if they wanted to claim compensation from the UK’s FSCS which pays out up to £50,000 to eligible clients. If the investor was owed more than £50,000 then this is paid on as an addition to the dividend.

There was a deal of controversy surrounding the costs associated with the Special Administration of Alpari UK, largely due to the potential absorbtion of client funds in a company which was exposed to negative balances and therefore did not have the capital to continue. How does KPMG’s consultancy fee translate into efficient distribution of remaining assets?

Under the Special Administration Regime, there is a strict legal basis governing the manner in which costs are charged and approved.  The creditors’ committee is required to approve the administrators’ remuneration. Alpari had over 100,000 clients in over 100 countries, which is a huge task to deal with. We have put in place an innovative electronic claims agreement platform to ensure that we are as cost-efficient as possible in dealing with client claims.

What preventative measures does KPMG recommend to electronic trading companies in order to avoid administration, and if insolvency occurs, how can a company get out of it quickly without being subject to administration?

Each case is fact-specific.  In Alpari’s case, the removal of the currency peg of the Swiss franc to the Euro, which had not been predicted by the markets, caused turmoil.  If a UK company becomes insolvent, then it must enter an insolvency process.  If it does not, the directors may be liable for the debts the company incurs after it should have entered an insolvency process.  Administration is only one insolvency process among several.

What is the next stage for Alpari UK’s customers and creditors in terms of regaining some of their assets?

Clients who have already agreed their claims have been paid a first dividend and/or compensation by FSCS. Clients who have not agreed their claims should do so as soon as possible using the online claims portal. Guidance is on the Alpari Administration website.

Non-client creditors have been invited to submit their claims and should do so as soon as possible. Again, guidance is on the Alpari Administration website. We intend to pay a first interim unsecured dividend by the end of this year. Clients and/or creditors who do not submit their claims will not receive a dividend until their claims have been submitted and agreed – therefore it is very important that they do so as soon as possible.