The cost of insolvency proceedings for a UK broker shut down by regulators, could reach as high as £100 million.
The case of Beaufort Securities, which was closed down following the exposure of illicit practices in an FBI sting, hit the headlines earlier this year and it has now emerged that the administrative costs of returning money and assets to its 15,000 investor clients could be far higher than initially anticipated.
The company, currently valued at £550 million, is facing criminal charges after it was alleged it had manipulated the US penny stock market and engaged in money laundering.
The potential high cost of the insolvency proceedings is said to stem from not only the administration fees, but also the cost of legal advice and retaining a number of Beaufort staff to ensure the process goes as smoothly as possible.
The £550 million valuation is a combination of assets (£500 million) and client money (£50 million).
The administrators were keen to stress that the £100 million figure was a worst case scenario, which would involve the insolvency stretching out across four years. They were also optimistic that the majority of clients, whose balances with Beaufort Securities were less than £50,000, would receive the full value of their portfolios back.
The financial outlook of Beaufort Securities had been looking uncertain for some time before the regulators stepped in and there presently remains the issue of an outstanding tax demand from HM Revenue & Customs (HMRC).
One half of the partnership handling the insolvency proceedings said: “It’s fair to say that because it didn’t have much capital, [Beaufort Securities] was living hand to mouth. There’s evidence that the management put money in last year, there’s equal evidence that they’ve stretched some of their creditors.”
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