ROCKINGHAM UPDATE ON ARM ASSET BACKED SECURITIES S.A.

One of the most common questions we are being asked is why did we sell ARM within our RITA contract in the first place so again we will try and answer.

It is a fact, annuities are both poor value and in some cases unsuitable due the low initial income, total lack of flexibility and lack of inflation proofing. The calculator on this link shows the true rate of return for an annuity based on how long the average person lives ( http://www.my-rich.co.uk/info/InflationCalculator.aspx ). Most annuities today, based on average life expectancy provide true returns (taking into account the total loss of all capital at outset) of less than 2% per annum.

It should also be noted that conventional annuities are irrevocable once established and cannot take into account any changes in lifestyle or health during the payment term.  One could ask would anybody commit to a 25 year mortgage that could never be changed in any way? That is exactly what you are doing when you buy an annuity. However, unfortunately there is very little alternative for most people and this is why Rockingham has specialised over the last seven years in ensuring that we secure the best possible annuity for customers (over 18,000 of them) in terms of rate and annuity type.

It is also a fact that in general income drawdown products are expensive and also unsuitable for most people as almost all drawdown plans are based on anticipated returns from Equities, Bonds, Gilts and Property. Anyone who went into conventional drawdown and invested in these areas five years ago will now almost certainly be regretting that decision.

It was Rockingham’s aim to develop a genuine alternative that gave people the flexibility of drawdown with some of the underlying capital protection offered by an annuity.

RITA was created to meet those needs in that the SIPP, the ‘Wrapper’  the RITA drawdown was contained within was offered for free, which is as low as you can go in relation to charges.

Rockingham then considered which investments to put into the structure and, came up with three core investments, Prudential’s Trustee Investment Plan which has a 100% capital guarantee as did the second the Met Life Guaranteed Investment Bond. The third investment was a life settlement fund and we chose the ARM Assured Income plan which whilst not containing explicit  capital or income guarantees was an asset class that was described by many at that time as low risk with the underlying assets being guaranteed life assurance contracts underwritten by A rated insurers or better. The following link provides examples from many journalists and fund managers who believed life settlement funds to be a Low risk option for investors, and we make no excuses for repeating this slideshow as it is easy to rate an investment with the benefit of hindsight. The simple truth is that at the time we, along with a great many others considered life settlements as lower risk than equities and if the truth be known they still probably are if they are not starved of new cash or bled by a run of redemption requests. (http://www.armhelp.co.uk/slideshow.htm ).

Rockingham selected the ARM bond after months of extensive due diligence on not only ARM and its Directors but on the Asset Class itself. We also directly contacted the other support companies that ARM used to establish the bond (counterparties) without ARM’s knowledge to check their credentials and their legal relationships with ARM. Rockingham also studied the Deloitte’s actuarial modeling associated with the ARM bond and were happy that the bond was capable of producing the anticipated returns suggested by ARM over the period of the investment.

Our research also  showed that returns on Life Settlement policies were running at 18%-22%. In addition we considered in depth every single risk area associated with the investment and asked ARM for their mitigating actions to reduce client exposure to the identified risks. These risks and associated mitigating actions were then reflected in the documentation provided to all clients.

Our interpretation of the core risks, that would significantly affect the bond were covered by the natural currency hedging and the wide diversification of policies within the portfolio creating a defined spread of health conditions should there be a cure for cancer for example that would affect the ultimate Life expectancy of the insured group. ARM also gave us full details of their methodology of covering liquidity risk including the potential sale of policies and the raising of cash by a third party liquidity facility if required.

ARM also provided us with  Deloitte’s actuarial model for the fund which depicted  the results of over 5,000 permutations in relation to maturities at different times and their relationship to expected mortality and cash flow. These showed without doubt that provided the bond continued to receive regular inflows of new investment until 2015 that the ARM bond would contain millions of dollars in surplus funds by 2025.

Unfortunately Rockingham did not consider that the risks associated with the cash flow modeling by Deloitte’s would actually be exacerbated by the Lux and Irish regulators themselves who were also provided with the same Deloitte’s reports by ARM. We also did not consider the basic mechanics of the ARM bond complex and certainly no more difficult to understand than many other investments including bank deposits especially for those banks that have casino style subsidiaries.  It is a simple fact that very few investing individuals know where bank deposit money is invested other than in subprime American Mortgages or Greek national debt.

The bottom line with the life settlement asset class is that the basic underlying asset ‘risk’ (the whole of life insurance policy) is without doubt ‘low’. The Insured individuals are regrettably going to pass on and it is regrettably for them just a case of when. If premiums are therefore paid on the policy to maturity then the proceeds will be paid out to the legal owners. In fact there has never been the case where an American whole of life policy has failed to pay under these circumstances in the last 100 years.

As a result of customers wanting to invest more of their funds into the life settlement asset class back in 2009/10 we  started to promote a small number of other life settlement investments. In total we sold these products to 39 people. At the time of placing these contracts we were not advised by the product providers or our external compliance contractors that these investments were classed as UCIS (Unregulated Collective Investment Scheme’s) and as a result we did not obtain full sophisticated or high net worth Investor sign off for these clients although the vast majority would have been eligible to make the investment.  As a result of this Rockingham has recently been fined by the FSA for this breach in regulatory protocol and been criticised for not understanding the ARM bond which we totally refute, and other related matters.

We would like to make it clear that the ARM bond is not a UCIS investment under FSA guidelines. It should also be noted to put the 39 UCIS cases into perspective that that over the last 7 years Rockingham has successfully completed annuity and retirement income business for over 18,000 clients.

For whatever reason, if the CSSF had granted ARM a license in 2009 things would be very different now for us all.

Rockingham ‘ARMhelp’ Support Team.

Steering Group Update

As per the RR post on 17th Oct you will know it is their intention to hand the operation of the ARMHelp website over to bondholders i.e. for it to be independent. You will hopefully also appreciate that I cannot continue to manage it on the present basis of each post being checked before it is allowed on to the website, particularly as we move to opening it to all bondholders (4000).

I am currently working with their IT guru to change the website to operate on a basis whereby anyone can post, but with a mechanism to remove posts which are deemed by other bondholders to be offensive, personal or demonstrably inaccurate. I also think that contributors other than bondholders ( regulators, IFAs Catalyst or ARM) must be able to post if bondholders are able to post comment relating to them, but would be interested on other views on these management aspects.

I have also asked the IT guru to investigate what search facilities might be available to enable bondholders for example to read through a particular theme over time, or the posts of a particular bondholder, i.e. to try and make the website more accessible and more useful.

I will post again when we switch to operating on that basis.

Alan Shanks

Steering Group Meeting Update

Never start with an apology they say, but I am sorry it’s taken so long to submit an update on our get together of the 18th. After two sucessive nine hour overnight coach journeys, the return in a bus with a wonky rear axle that was louder than my headphones, I was not at my sharpest yesterday.

The meeting on Tuesday was not the most organised I have ever attended. In fact it was a series of mini meetings., brought about by the changes of emphasis and timetable right up to the last minute. I hope none of you who took the trouble to attend felt that we were discourteous or inattentive because of the confusion over times. I also hope that despite all it’s shortcomings we will in future look back on the day as the start of “bondholder power”, the day we began to work together as a group rather than all working independently.

Aside from that benefit of feeling part of a group there were three main actions which I noted to be progressed:

  1. Chase the offer letter and any other information which should be made available to the bondholders, whether in capital growth, income or pending categories.
  2. Write to all bondholders on the formation of the embryonic Sterring Group.
  3. Prepare template letters to be available to all if we feel a move to en-masse lobbying is required in future.

I spent my time yesterday on point 1. Having written a letter in a café in Victoria late on Tuesday evening, fired with the combined indignation of the day, I re-read it yesterday after a couple of hours sleep and realised it was too confrontational. I have therefore contacted the FSA and asked them to convey the following to the CSSF on our behalf. The request is that we are provided this week with either the offer document, or an explanation of the problems holding up the document, and a timescale for it’s publication. Phrasing it in that way means that a zero response can only be interpreted as disregard rather than necessary confidentiality. The contact at the FSA has been very helpful and will revert to me when he has discussed this issue with his counterparts at the CSSF.

The second main action was to inform other bondholders of Tuesday’s meeting and of our attempt to form a Steering Group which could represent all. I have spoken to Catalyst and ARM and once we have composed a letter they will pass that to all bondholders through the bondholder register to ensure everyone is able to contribute to the formalisation of a representative Steering Group. Ian and Brian have begun work on the letter informing everyone of the initiative and seeking input from others whose feedback and experience could enhance the group or the approach. Although, with 4000 bondholders, this is no small task, hopefully we can achieve a group and a remit which bondholders feel they can mandate.

The third action was to prepare template letters for MPs etc whom we feel could bring pressure to bear on the current “suspended animation” situation if our latest appeal via the FSA does not bear fruit. Obviously points 1 and 2 are the immediate priorities and the creation of template letters will be undertaken as and when necessary.

Alan Shanks

ROCKINGHAM UPDATE ON ARM ASSET BACKED SECURITIES S.A.

Further to our post yesterday we would like to apologise for the delay in providing updated information from the Steering Group.

The group met yesterday to share views and  formulate strategy. We understand that they are in the process of preparing communications to the key stakeholders and they will be providing us with an update for posting for the benefit of all Bondholders.

The group also met in a separate meeting with a number of bond holders to take their concerns and questions prior to finalising their strategy.

We have agreed with the Steering group whose aim is to provide a central point of communication for all bondholders that the content of the ARMhelp website will be passed onto  them in the near future for updates etc to ensure that the site remains unbiased and clear in its approach to providing Bond Holders with relevant and accurate information.

We have not received any communication from either the CSSF or the FSA today.

ARM have confirmed that they are still awaiting confirmation from the CSSF that they can forward the promised Insetco Letter to clients as soon as possible.

ROCKINGHAM UPDATE ON ARM ASSET BACKED SECURITIES S.A.

Catalyst/ARM

We have been advised by Catalyst that they are currently still awaiting an update and confirmation from the CSSF that the Insetco letter can be forwarded to bond holders.

FSA

The FSA have advised that they have no new information to provide to bondholders at the present time. They have advised today that whilst they cannot attend tomorrows steering group meeting they are willing to look at any questions compiled by the group on behalf of all Bond Holders  and provide answers as appropriate.

CSSF

We have not received any response from the CSSF regarding any progress on resolving the ARM situation.

Rockingham Independent Ltd.

The proposed ARM independent steering group is meeting tomorrow at Catalysts offices as notified to Bond Holders last week. We anticipate that further information will be provided by the group fairly soon after tomorrow’s meeting for the benefit of all bondholders.

We will be arranging for an independent line of communication to be established over the next couple of days directly to the Steering Group so that individual Bond Holders can direct questions directly to them.

 
Rockingham ‘ARMhelp’ Support Team.

ROCKINGHAM UPDATE ON ARM ASSET BACKED SECURITIES S.A.

Catalyst/ARM

We have been advised by Catalyst that they are currently still awaiting an update and confirmation from the CSSF that the Insetco letter can be forwarded to bond holders.

FSA

The FSA have advised that they have no new information to provide to bondholders at the present time.

CSSF

We have not received any response from the CSSF regarding any progress on resolving the ARM situation.

Rockingham Independent Ltd.

Following yesterdays update and postponement of the formal meeting with the FSA, ARM and CSSF we have received the mail below from the proposed “ ARM Information Steering Group” with regard to the postponed meeting in London next  week who are looking to provide independent and impartial information to bondholders.

This post offers any bond holders who would like to visit Catalysts offices on the 18th of October, the opportunity to directly engage with members of the proposed steering group. If you would like to take advantage of this meeting please can you let us know by e mail over the weekend so we can plan for anticipated numbers.

Catalyst/ARM Steering Group Post

Alan Shanks sent us an e-mail on 6th  October expressing his views that the meeting scheduled for 18th October should be structured like a Commons Select Committee meeting. Rockingham asked him if he was prepared to chair this to which he agreed and he now sends you all this message:

My name is Alan Shanks and I am an ARM bondholder.I am one of the four investors RR have asked to form a “Steering Group” to try and make our search for information and solutions more co-ordinated and more effective.

We four feel the arrangement for the meeting in the Catalyst office on the 18th has been left in a rather confused state by last nights posting on the website.

The members of the group are:

Brian Love who is retired. During his career he worked as a Consumer Advisor to successive UK Government regulators. It is he who composed the letter to the CSSF which you can see on the ARMHelp website.

Ian Ward is a local and district councillor and the author of the template letter which bondholders are urged to adapt to their own circumstances and forward to their own MP. The letter again can be seen on the ARMHelp website.

Bob Sharpe is retired, but a busy private investor, experienced in the ways of company research and analysis as you will see from his responses to the daily postings on the ARMHelp website.

Alan Shanks is retired. He was an IT project manager in the finance industry who in the latter part of his career found himself specialising in projects which had “gone off the rails”.

We have composed a serious of questions seeking to provide a clear understanding of the history, finances and options for the future of this debacle. These have been passed to Catalyst and ARM and the answers will be used to create an agenda and questions for the investors’ meeting with Catalyst and ARM when that is finally organised.

We feel that the group have a complimentary set of skills to enable them to act on behalf of investors as a whole. Three of the four can make the meeting at the Catalyst office, unfortunately Bob is out of the country. Although meeting Catalyst and ARM has had to be postponed we would now urge any investor who feels they would benefit from talking to members of the group to join them on Tuesday between 11:00 and 15:00. Please let Rockingham Retirement know if you plan to join us on Tuesday (drop in anytime, it will not be a set, formal structure) and we will arrange working lunch nibbles as required.

This attempt to bring organisation to our efforts to secure the best solution is clearly at a very embryonic stage. The four individuals in question have never even met in person. After Tuesday we will try to make the arrangement more formal by finding some way to seek a mandate from investors. At this stage if others feel they have the time and skills to assist we would be very happy to include them, or to replace members such as myself who have to travel from Edinburgh for meetings, which is obviously more expensive and time consuming than for investors based in and around London. Whatever the format of the final “Steering Group” there is no doubt it would give the them greater authority (on behalf of the whole investor group) with the various bodies involved, than any one individual can hope to have on their own

Rockingham ‘ARMhelp’ Support Team.

ROCKINGHAM UPDATE ON ARM ASSET BACKED SECURITIES S.A. – URGENT ANNOUNCEMENT

Postponement of intended Bond holder meeting on the 18th October 2011 at Catalyst Offices in London.

It is with regret that we must advise bondholders who were planning to attend the meeting next week, that this has now been postponed until further notice but please read all of this detail.

Rockingham regrets the postponement of this meeting but this decision has been made following a lack of a response from the FSA in relation to their confirmation of attending the meeting, and formal notification by ARM’s solicitors to the ARM board that attendance would be difficult due to legal and regulatory restrictions surrounding the bonds status and the planned Insetco offer.

We have also now been advised by Tim Roberts on behalf of the board of ARM that he sends his apologies in relation to not being able to attend this meeting, and he is hoping that the meeting can be re-scheduled after the Insetco letter is released by the CSSF.

Without representation from the major parties (the CSSF have already declined an offer to attend meetings in the UK), and the fact that the Insetco offer cannot be discussed prior to the release of the offer document, the meeting as we had proposed would not provide the format to answer bondholder and pending investor questions at this time.

However, we are aware that this is a very late postponement, and some of you may have already made travel arrangements.

Rockingham has been asked to facilitate the formation of a ‘Representative Committee’ of professional bond holders, who can communicate and act for all ARM investors across Tranches 1-8 and 9-11. This ‘Representative Committee’ will be acting in the best interest of ARM investors only. If you have already made travel arrangements then one of the Representative Committee has agreed to be available on 18th October at the Catalyst offices to speak with you ahead of the first ‘Representative Committee’ meeting. This person is an investor and is acting independently.  If you have already registered your interest in attending the meeting then we will be contacting you.

We are sorry for this change of plan, but this is a postponement of the intended meeting not a cancellation.

Catalyst/ARM

We have been advised by Catalyst that they are currently still awaiting an update and confirmation from the CSSF that the Insetco letter can be forwarded to bond holders.

FSA

The FSA have advised that they have no new information to provide to bondholders at the present time.

CSSF

We have not received any response from the CSSF regarding any progress on resolving the ARM situation.

Rockingham Independent Ltd.

Earlier this week we advised that one of our investors was compiling a communication to the CSSF to represent the interests of all bond holders. This communication has now been sent and received yesterday.

A copy of this document is reproduced below and we will of course keep you informed of any developments or communications that are received from the CSSF.

Personal attention of Monsieur Jean Guill

Director General

Commission de Surveillance du Secteur Financier

Dear Sir,

I write on behalf of a group of investors who are counter signatories to this   letter. All are affected by the dispute between CSSF and ARM. We wish to make it clear from the outset that we do not and will not take sides with either CSSF or ARM. Our intervention is based on the need to protect and maximise our investment. A point I will return to later.

My background is that I was appointed by the UK Government and served for 10 years as a consumer advisor to three different regulators. I have tried to get an understanding of the mindset of your regulation from the English translated version on your website to understand under what powers you are able to place an embargo on a letter or letters designed as an informative instrument between affected parties in the dispute. I have concluded that I cannot see any justification for your action. We as investors are victims of actions taken by parties to the dispute. We have a right to total transparency and believe your action to be over zealous. We are intelligent people and intellectually capable of deciding on the merits or otherwise of proposals for the administration and maximisation of our investment.

I do not understand why you cannot accept an open flow of correspondence between parties, particularly since trading in the Bond is on hold removing the possibility of any unfair trading. You can easily impose a requirement that every piece of correspondence comes before you, giving you the opportunity to counter anything that you find unacceptable. This in my experience is normal regulatory transparency and treats all parties to a dispute fairly.

It appears to me that you are committed to a single track solution to the problem. That of bringing ARM into administration. Despite your claims that this would best protect our investment I suggest that you would be reluctant to give any guarantees on that. There would certainly be costs which, unless you were going to take responsibility for settlement, would present an unknown burden on our investment. That is why we believe we are entitled to see and consider other options.

I feel also that you should take account of the fact that apart from the regulatory approach, there is a moral issue here. In that regard, the letters written to you by Rockingham Retirement, which it appears you have not responded to, deserve a response and not to do so is discourteous. Rockingham is an FSA regulated body and are the body that handles our investment.

Perhaps I can elaborate a little on the point they make so lucidly. Most of the Investors are UK senior citizens who have worked for fifty years or so to accumulate a fund that would enable them to live a worry free life, free from debt and financial pressure in retirement. To have this hanging over their heads is reminiscent of ‘the Sword of Damocles’. There can be no moral justification for placing obstacles in the way of resolving this matter speedily and in the best interest of investors. My perception is that the process thus far has been over bureaucratic and has failed to properly appreciate the big picture. We as Investors did not wish to be dragged into a situation like this, but now we are where we are, we are resolved to broaden the scope as necessary.

To that extent, we will work to the following principles:-

1)       To secure an immediate release of the embargoed ARM/Insetco letter.

Please confirm that this will be released without further delay.

2)       To require from CSSF disclosure of the variations requested in the drafting of that letter and the dates upon which they were requested and submitted.

3)       To brief our respective Members of Parliament.

4)       To have the matter raised in the UK Parliament and either/or the UK Treasury, Business Department or the Minister for Europe.

5)       To raise the matter in the European Parliament.

It should be noted that this is an escalation process along which we wish to move quickly and despite the forthcoming appeal expect to have covered the principles in no more than one month.

Finally, and on a personal note I recommend that if you have not already done so, you look at the website, www.bis.gov.uk/bre  This site is self explanatory and is gaining momentum not only in Britain but other European states. I do not wish to comment at this time but I guess you can appreciate where my support lies.

Yours faithfully

xxxx

Rockingham have also today sent a copy of the above CSSF communication to Verena Ross Executive Director at  ESMA following on from our earlier communication to ESMA (The European Regulators Regulator) earlier this week.

We have also been advised by our legal representatives  that we should refrain from posting Bond Holders views and opinions regarding the proposed Insetco offer until after full details have been  released by the CSSF.

Rockingham ‘ARMhelp’ Support Team.

ROCKINGHAM UPDATE ON ARM ASSET BACKED SECURITIES S.A.

Catalyst/ARM

We have been advised by Catalyst that they are currently still awaiting an update and confirmation from the CSSF that the Insetco letter can be forwarded to bond holders.

FSA

The FSA have advised that they have no new information to provide to bondholders at the present time.

CSSF

We have not received any response from the CSSF regarding any progress on resolving the ARM situation.

Rockingham Independent Ltd.

Due to the number of people wishing to attend the bondholder meeting next week on 18th October, we will be holding the meeting over three sessions at 11am, 2pm and 4pm. We will be contacting you soon to determine which session you would like to attend. The meeting will take place at the Catalyst offices in London at:

125 Old Broad Street
London  EC2N 1AR

The nearest tube station is Bank on the Northern, Central and Waterloo lines.

Otherwise we have not received any communication from Catalyst/ARM, the FSA or ESMA. We will continue to chase all parties for progress on what is happening with your ARM bond.

Rockingham ‘ARMhelp’ Support Team.