Two new documents were released by the KPMG Special Administrators for Alpari UK on Wednesday, an Illustrative Financial Outcome on April 8, 2015 and a Valuation of Swiss currency pair trades.
The Illustrative Financial Outcome includes a low and high case, showing missing clients’ funds to be between about $12 to $37 million. The client funds recovered to date total $98,653,088.
KPMG’s time costs from January 19 to March 27 amounted to about $5.86m, on top of $1,282,000 in legal fees.
The Special Administrator further notes that the Illustrative Financial Outcome shows the range from low to high, this is not the same as “worst” and “best” as not every adverse contingency is included in the low case, nor is every positive outcome included in the high case.
Alpari UK used four e-Wallet providers which are not subject to client money segregation rules. The Special Administrators have currently classified the e-Wallet receipts as client money to ensure they are adequately protected, until the position is fully determined.
In the low case illustrative financial outcome it is assumed that the funds received from e-Wallets ($492,000) will be re-classified as house funds. In addition, KPMG are still in discussions with a number of financial institutions regarding client funds that they hold that have been subject to various chargebacks and have assumed further recoveries of $125,000 in the high case illustrative financial outcome in this regard.
The Special Administrators’ time costs from January 19 to March 27 amounted to £3.95m. The financial outcome includes these costs together with a provision for the estimated costs of the conclusion of the Special Administration. No fees have been drawn as of April 8, 2015. To date, KPMG has also paid legal fees in the sum of $1,282,000.
Access to Claims
The prices at which clients’ trades were closed on the 15th and 16th of January, 2015 is a major determining factor in the total Client Claims. The paper released, “Valuation of Swiss currency pair trades”, outlines the methodology by which CHF trades will be treated.
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Following the valuation, KPMG considers that all transactions were executed within the parameters of the Client Agreement and in accordance with regulatory requirements other than a number of cases. Therefore, they have decided to value client claims by reference to the prices received for the original transactions.
Adjustments will only be made in the following instances:
- Trades where stale price feeds were used to close out client positions.
- Client positions that are deemed to have been executed at prices that exceed reasonable “best execution” limits. These positions are being adjusted to bring them within KPMG’s assessment of best execution.
- Where stale CHF currency pair pricing has resulted in the profit or loss being converted at the incorrect rate when either the quote currency or account currency was CHF.
KPMG expects to be able to release access to the Claims Portal for the great majority of clients who had opened CHF trades by April 30, 2015. A small minority of clients with open CHF trades will be further delayed from accessing the Claims Portal while some “remaining data integrity issues” are resolved by the Joint Special Administrators.
Clients’ Money Pool
The Joint Special Administrators propose to declare prior to April 30. 2015 an intention to distribute funds from the CMP. FCA consent will be sought prior to making the Declaration of Intention.
The Declaration of Intention will set a final soft date for clients to agree to claims within the 28 days following the Declaration of Intention.
Clients who have agreed to their claims by the Final Date for Agreement will receive a first interim dividend on the date of the first interim distribution of the CMP. The precise amount of the first interim dividend will be calculated as close to the date of the first interim distribution as operationally possible to allow it to be maximized.
Regular payment runs will be performed after the first interim distribution date to bring those clients who subsequently agree to claims to the same cumulative distribution level as other agreed clients.
KPMG is in discussions with the FSCS with a view to harmonizing the payment of dividends from the CMP with the payment of FSCS compensation to those clients who choose to assign their agreed claims to the FSCS.