Suspended firm gets approval to repay funds to clients

FINANCIAL SPREADBETTING firm Marketspreads began returning clients’ funds to their bank accounts yesterday after regulators gave it the green light to release the cash to its customers.

The Central Bank ordered Marketspreads to suspend operations last week, citing concerns about capital adequacy and audit issues.

The bank’s move also meant that clients’ accounts had to be suspended and money could not be returned to them.

However, the Central Bank confirmed to the company yesterday that it has amended its order, and Marketspreads began returning cash to clients’ bank accounts and bank cards.

Since last week, Marketspreads has maintained that clients’ cash is segregated from company funds and intact.

Professional services firm Grant Thornton confirmed this in a report given to the Central Bank and the company late on Tuesday.

The company issued a statement yesterday saying it was returning all funds to clients. The total amount involved is said to be €5-€10 million. The firm has about 2,000 clients.

The company’s operations remain suspended while it addresses the Central Bank’s concerns in relation to its capital position and audit issues. Director and shareholder Ray Curran has agreed to convert €2.4 million in loans to preference shares in the group and to forego a €100,000 interest repayment to satisfy the regulator’s capital requirements.

The Central Bank’s audit concerns relate to accounts just filed by the company for the nine months ended December 21st, 2009. These cover the period immediately before its current owners bought the business from Worldspreads plc.

A number of issues relating to that period, which arose subsequently, prompted the company to write down net assets by €7 million.

As a result, auditors Ernst Young did not give an opinion on whether the financial statements gave a true and fair view of the company’s position on December 21st, 2009.

This, in turn, prompted the bank to order the company to suspend operations.

The company met the Central Bank, which regulates spreadbetting in the Republic, yesterday to begin working on a solution.

In its statement, Marketspreads said that it was devoting extra resources to finalising its 2010 accounts, which it expected to have a clean audit.

The company had to produce figures for the 2009 period before filing returns for 2010.

Joint chief executive John McGlade signalled in the statement that the company was hopeful it could restart operations in the near future. The management of Marketspreads bought the business from Worldspreads plc in December 2009.

Two of the leading figures in the buyout, former executives Brian O’Neill and Fergus Rice, left Marketspreads last year after the board discovered that they had transferred €1.4 million of the company’s funds to another business in which they were involved.

Both recently agreed to judgments against them in the High Court for €1.68 million – the principal sum plus interest.

They had also agreed to sell their interests in the Marketspreads parent company, OR Spreadbetting.

Worldspreads plc’s operations are under special administration in Britain after its board discovered a £13 million shortfall in client funds.

Conor Foley, Worldspread’s former chief executive, Mr O’Neill and Mr Rice originally founded the business in Dublin.

Spread trading companies are subject to capital adequacy rules in the same way as banks and other financial services providers, hence they are overseen by the Central Bank.