Reyker Securities’ administrators publish first progress report

Maria Nikolova

The administrators consider it more likely that client assets will be transferred or distributed through a series of partial transfers rather than a wholesale transfer to a single purchaser and/or regulated broker.

Smith & Williamson, the joint special administrators (JSAs) of Reyker Securities, which entered administration in October last year, have published their first progress report. The document outlines the work done by the administrators during the period from October 8, 2019 to April 7, 2020.

After undertaking additional work over the last few months, the total number of Reyker Securities’ clients is presently believed to be 11,126, each of whom hold either Client Money or Custody Assets or a combination of both with Reyker. The vompany’s records also indicate that, as at the date of the Special Administration, the company held Custody Assets and Client Money with a value of approximately £924 million and circa £57 million respectively (as valued at close of business on October 7, 2019).

The Bar Dates expired at 5.00pm on 7 April 2020. During the Bar Dates period, 70% of all Client accounts (being 7,832 out of 11,126) were verified and submitted.

At present, although discussions are ongoing in respect of a sale of Reyker Securities’s business and assets and a wholesale transfer of Client Assets, the JSAs consider it more likely that Client Assets will be transferred or distributed by way of a series of partial transfers rather than a wholesale transfer to a single purchaser and/or regulated broker.

Therefore, the JSAs’ primary strategy is now focused on a series of partial transfers of Client Assets to as few regulated brokers as possible (on account of complexity, cost and timescales).

The process of undertaking a series of partial transfers of Client Assets (as opposed to a wholesale transfer to a single purchaser) is more complex for numerous reasons and, depending on the approach adopted for the distribution of the CMP, will include the need for additional Client communications. This will therefore add additional time and expense to the transfer of Client Assets.

Given the recent developments, the JSAs are unable to provide any certainty on the timing of a transfer of Client Assets within the first progress report, however, the Regulations and the Rules state that the transfer of Custody Assets may not take place sooner than three months from the respective Bar Date and a Distribution Plan is required which is dependent on court time and court availability. This means that, in any event, the transfer of Custody Assets could not be implemented sooner than July 7, 2020.

Due to the Summer recess, where the courts do not hear applications (other than urgent applications) from 1 August 2020 to 30 September 2020, it is uncertain whether a Distribution Plan may be considered by the court before October 2020.

The JSAs have been liaising closely with the FSCS in order to streamline the process by which eligible Clients may receive compensation in order to mitigate the need for an eligible Client to submit a claim directly to the FSCS themselves and, where possible, to ensure Client Assets are transferred to any purchaser or preferred broker(s) whole.

Accordingly, the FSCS has confirmed that it has treated all Clients with Client Assets with a total value of less than £85,000 as at 8 October 2019 as if they have claimed compensation. This means:

  • Clients who have Client Assets with a total value of less than £85,000 as at 8 October 2019 will have automatically been treated as having submitted a claim for compensation from the FSCS and they do not need to take any further action in this regard unless specifically contacted by the JSAs or FSCS. The JSAs are in the process of reviewing each client’s eligibility jointly with the FSCS; and
  • Clients who have Client Assets with a total value as at 8 October 2019 either equal to or greater than £85,000 will not be treated as having automatically claimed compensation from the FSCS. Such clients are asked as part of the online claims process to confirm whether they wish to submit a claim for FSCS compensation or not.

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