Spreadbet clients likely to get funds returned

AN INDEPENDENT report by accountancy firm Grant Thornton on the financial status of the suspended spreadbetting firm MarketSpreads is due to be sent to the Central Bank today, paving the way for the return of funds to clients.

It is understood the report will say clients’ funds remain segregated from the company’s and have been properly managed.

John McGlade, joint acting chief executive of MarketSpreads, said the company was currently in a position to return client funds and was awaiting authorisation from the Central Bank to do so.

“MarketSpreads is profitable, solvent and client funds are 100 per cent intact,” Mr McGlade said. “We are working with the Central Bank to address their issues which stem from prior to December 2009. We hope to be open for business soon.

“Clients, who have been hugely supportive, will have any withdrawal requests actioned as soon as the Bank gives its permission.”

Client funds in MarketSpreads, one of Ireland’s largest spreadbetting businesses, are in the region of €5 million-€10 million.

The Central Bank ordered MarketSpreads a fortnight ago to commission an independent review of its trading position from a professional services firm.

Grant Thornton was close to completing the report when the regulator surprised the company last Thursday by suspending its trading licence.

The company says this forced it to close any open positions held by clients.

In a statement, the Central Bank said it had been “working closely with current management” to “address legacy financial issues”, but cited the inability of the MarketSpreads’ auditors Ernst Young to give the green light to accounts filed by the company for the nine-month period before the current ownership took control on December 21st, 2009.

“In light of this, the Central Bank considers it necessary in the interest of the proper and orderly regulation and supervision of an investment firm and for the protection of investors to suspend the activities of Marketspreads.”

Ernst Young states in the 2009 accounts that it is unable to form an opinion as to whether or not the financial statements give a true and fair view of the firm’s position.

In 2009, the business was part of WorldSpreads Ireland, which was in turn part of the now collapsed WorldSpreads group. The current owners of MarketSpreads bought the business on December 21st, 2009, and it is now separate from WorldSpreads.

However, the new company was still obliged to provide accounts for the previous nine months. When compiling these accounts, issues came to light that forced the company to restate previously published figures for the business and write down assets by €7 million.

MarketSpreads is suing WorldSpreads for fraudulent misrepresentation and breach of warranty and has withheld a €1.4 million deferred payment from the deal.

It is understood that MarketSpreads, which is being led by Mr McGlade and John McNicholl as joint acting chief executives, is hoping to fast-track an audit of its 2010 accounts by the firm Hughes Blake.