SVS entered special administration in August 2019, after the Financial Conduct Authority (FCA) found significant issues in the way the business operated, with some clients being charged in excess of 20% of the total investment.
It provided advisory, management and asset administration services.
Leonard Curtis, the administrator, found that the firm had around £278m ($340m, €309.5m) in custody assets when they took over the company.
But many of those assets are illiquid securities, including a number of bonds, whose value is uncertain, it said.
On the hunt
Now the joint special administrators are looking for a brokerage firm to handle the funds distribution to SVS’ clients, as this was deemed the “quickest and most effective way”.
But, if this fails, Leonard Curtis would need to appoint several brokerage firms and it would take more time for funds to be paid back.
The administrators said that a brokerage firm is needed because if it was to release client money now, they “could be exposed to the risk of competing claims from other clients or third parties who may argue that the company’s records were not, in fact, correct”.
“Clients might not get what they are entitled to, and distributions might need to be reversed later.”
Most of SVS’ clients, however, are set to receive full compensation, Leonard Curtis said.
It is working with the Financial Services Compensation Scheme (FSCS) to make sure that the cost of transferring the funds will not burden the cutomers themselves.
The joint administrators said: “Where eligible clients would experience a shortfall of up to value of £85,000 (for example, as a result of the costs of the transfers of their custody assets and/or client money to a nominated regular broker), the FSCS will seek to provide compensation in respect of eligible clients without it being necessary for a claim to be submitted in most cases.
“The administrators currently expect that the vast majority of clients will be compensated in full by the FSCS for any costs of the transfer.”
Some losses expected
Although this might not be true for all of SVS’ clients, as those that are not individuals or small companies are not eligible for compensation from the lifeboat scheme.
“It appears there may be a small number of clients who may face shortfalls as a result of the company’s insolvency, either because they are ineligible for FSCS compensation or because, owing to the value/amount of their holdings of custody assets and/or client money, their loss may exceed the cap of FSCS compensation of £85,000 per person,” the administrator added.