Thursday 16th February 2012

The News today that Margaret Cole has given notice of her intention to leave the Financial Services Authority after being passed over for the top position at the Financial Conduct Authority, which will replace the FSA next year, will come as no surprise to ARM bondholders.

The job of a regulator is to consider all aspects of the business that is being regulated whether new or particularly existing regulation. Only when there is a precise determination of all related aspects and the unfettered consequences of going forward should any kind of judgment and announcement be made.

Margaret Cole showed no respect for this principle when in December 2011 she gave maximum publicity to describing the ARM investment as Toxic. This announcement was singularly responsible for closing down coupon payments. Even if this had been a correct description of the investment a description which is rightfully challenged, she further showed no respect for bondholders who in some cases are dependant on coupon payments as a regular source of income and who are now struggling to pay their normal household bills.

The announcement of her parting tells us that she will be continuing in her current role heading up the conduct business unit until the end of March, after which she will go on gardening leave until August 31st at a monthly salary of £28,000.

So after making an ill considered statement that was instrumental in stopping the income of ARM bondholders, she will be paid £140,000 for doing nothing.

Brian Love

ARM Steering Group.




Lifemark fund liquidation order dents levy hopes
The Luxembourg regulator has demanded the liquidation of the failed Lifemark funds, denting hopes the UK’s FSCS would repay Lifemark-related levies.

By Nick Reeve | Published 08:41

Compensation for investors in Keydata partner firm Lifemark was the main reason behind the £100m interim levy that was handed to investment advisers in January last year, and the FSCS (Financial Services Compensation Scheme) has since been working to find a backer to save the cash-strapped life settlements fund.

But the CSSF, Luxembourg’s financial regulator, last week blocked any further efforts to preserve the solvency of the portfolio by proposing to remove its license to trade – the first step towards liquidation.

Keydata’s original founder Stewart Ford – who also failed in multiple attempts to broker bailout deals for Lifemark last year – has previously warned that a ‘fire sale’ liquidation of Lifemark would lead to 90 per cent losses for Lifemark bondholders.

The FSCS is Lifemark’s main creditor after compensating Keydata investors, which brought about last January’s £326m total industry interim levy, including £236m of levies for fund managers.

Bondholders are set to vote on February 13 on measures to facilitate the controlled liquidation, which will include extended powers for provisional administrator Zia Hossen of KPMG to allow him to sell assets easier.

Once Lifemark’s trading license is withdrawn, the CSSF will ask the commercial court in Luxembourg to appoint a liquidator, a process which is expected to take roughly three months to complete.

“Liquidation of Lifemark will mean a fire sale, and nobody will get their money back,” Mr Ford told Investment Adviser in October 2011. “This option is in no one’s best interests. It is tantamount to commercial suicide.”

The FSCS had set aside $10m (£6.3m) as an emergency lending facility for Lifemark in the hope that it could be managed as a solvent entity, allowing its life settlement policy holdings to mature and pay out full value.

However, the CSSF’s statement said Lifemark was continuing to experience liquidity issues which have hampered KPMG’s attempts to reclaim money for investors.

The FSCS is now likely to focus on pursuing financial advisers who promoted Keydata’s Lifemark products to their clients to recover its losses. Those who sold SLS-backed Keydata products have already been contacted by the scheme’s lawyers Herbert Smith.

The FSCS last week announced that this year’s annual levy for investment advisers would be £33m, made up in part from Keydata claims. There could still also be an interim levy of as much as £40m to cover a deficit in the scheme.