London Based Investment Company Enters Special Administration…
Special Administration is on the rise after Hartmann Capital Limited, a London based investment firm, became the sixth company to be placed into the process by the Financial Conduct Authority.
For those of you that follow the rise and fall of London’s investment banks, you will know that the Special Administration process is relatively new as the regime has only just been introduced following the collapse of (probably the most high profile failure in recent times) Lehman Brothers.
Lehman Brothers posed many difficulties for the Administrator and the government generally given the complexity of its structure and the restrictions on the powers within Insolvency Law to control and distribute assets. In investment banks clients often have claims on multiple levels as opposed to distributions made as per a simple order of rank as laid down by the Insolvency Act 1986 therefore some say the Special Administration process was brought in to ensure the mistakes made by the collapse of Lehman Brothers were not repeated.
What is a Special Administration?
It is worth stating that a Special Administration is still an insolvency process which allows for a distribution of the assets, like a standard Company Administration, however it is specific to investment bank failures where the process has been tailored in order to allow for as little disruption to the financial markets as possible.
The revised procedure aims to achieve (this reduced disruption to markets) by amendments to the following factors:-
- Further defining the protections in place for investment clients and other stakeholders connected to the Company.
- Ensuring that the route into insolvency is far more precautionary and restricted to reduce the risk of harm to the process, the market and the stakeholders.
- Improvements to the efficiency of the wind down of an investment firm by focusing on changes to infrastructure, staffing and services.
- Improvements to the powers of an Administrator to access client funds for distribution and control purposes.
- Greater reporting requirements to improve clarity at each stage (such as trading, clearing and settlement).
Here’s hoping that the the popularity of the new Special Administration process has a positive effect on the above factors and that the changes enable a greater return for creditors.
For more details on the process generally, and how it might affect you, a full dossier on the process has been produced by HM Treasury and can be found by clicking the following link