Worldspreads, the spreadbetting firm, is the latest FSA regulated business to enter the Special Administration Regime (SAR) after a £13 million shortfall in client money was uncovered. This follows Pritchards Stockbrokers. In an announcement posted on the stock exchange this morning the board said there was a hole of some £13 million and the shares in the company have been suspended. The firm has around 5,000 clients.
The High Court has appointed Jane Moriarty and Samantha Bewick of KPMG LLP as joint special administrators.
So what is the Special Administration Regime?
Following the collapse of Lehmans Brothers it was felt that the current legislation under the Insolvency Act 1986 was not sufficiently robust to deal with the complications of investment firms and their financial products. The issues of multiple cross liabilities, trusts, determining assets, valuation and the stability of the financial system raised additional challenges. Consequently, the Special Administration Regime or SAR was set up in 2009. It comes under the Banking and Finance Act but takes as much as possible from the Insolvency Act.
The Financial Services Authority has the power to appoint a special administrator if it feels that client's money is at risk.