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#1 03-01-2020 16:09:01

Admin & Trader
From: Paris - France
Registered: 21-12-2009
Posts: 2753

2 British brokers go bankrupt in 1 month - whose fault is it?

2 British brokers go bankrupt in 1 month - whose fault is it?

The recent bankruptcies of British brokers have raised many questions about established concepts, including whether these investment platforms are secure enough to prevent clients' funds from being frozen in the event of insolvency.

Companies go bankrupt and collapse under administration, which often has huge ramifications for investors, for many reasons. Some are linked to unforeseeable events and circumstances beyond the control of the company, while others may be linked to internal mismanagement, bad decisions or commercial fraud.

But whatever the reason or the scenario, the greatest risks, impacts and losses threaten not only those with fixed assets with a bankrupt broker, but also the confidence and reputation of the entire market.

Clients and underlying creditors face a few tight months without access to their assets, while administrators reorganise their portfolios. Worse yet, broker bankruptcies often arise unexpectedly, and traders often don't know what's going on until their assets are frozen.
A cumulative blow to the UK brokerage industry

Two recent bankruptcies in the UK represent the biggest collapses in the CFD and forex sector, with both companies entering special administration procedures last summer. The companies were trading in securities and contracts for difference, which caused consecutive shock waves across the industry.

SVS Securities Plc (SVS)
, which was established in 2002, acted as a broker in regulated financial services, holding significant amounts of client funds and assets. The second one is AFX Markets Ltd (AFX), which was created in 2011 and overseen by the FCA for almost 8 years.

Leonard Curtis revealed that SVS Securities processes 276 million in assets and 23 million client deposits in 20,500 accounts. In addition, there are approximately 669 unsettled trades, including certain bonds, the value of which remains uncertain.

Both companies entered the special administration regime this past August, which makes the two brokers the 17th and 18th companies to enter the special administration procedure of the investment bank since its creation in 2011. Furthermore, this collapse is the largest in terms of magnitude since that of Beaufort Securities Limited, which had collapsed in the same process in 2018. The two brokers are now under the control and auspices of their respectively appointed insolvency practitioners.

What is the Special Administration Plan (SAP)?

The SAP was created by the UK nine years ago, to directly address situations where investment firms, which may hold client money, go bankrupt. The SAP process has a number of objectives, but an essential element is to ensure that traders' money and assets are protected quickly and securely before being returned to customers as soon as reasonably possible.

The special administrators involved in each case have now taken control of the affairs of each company and have already contacted consumers to advance their claims. In addition, the directors studied the options available to companies in the future, which could see them eventually liquidated or involve a process of selling all or part of each company.

The facts seem to be:

The Financial Market Supervisory Authority (FCA) undertook urgent and targeted surveillance of these companies after identifying serious problems with their operations and practices, including the assets in which customers' money was invested. The supervisory body has acted duly to prevent these companies from carrying out other regulated activities and to effectively restrict their ability to dispose of their own assets or those of their traders.

It should be noted that it was the SVS board of directors that decided to place the company under special administration, but the request for special administration of the Toronto Stock Exchange was made by direct order of the FCA itself.

Any reasonable person can therefore wonder what actually happened within these companies enabling them to approach bankruptcy. This story will undoubtedly be followed up on shortly, with more details...

"Anything worth having is worth going for - all the way." - J.R. Ewing



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