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The Financial Services Compensation Scheme (FSCS) carried out the first tranche of compensation payments to former Alpari UK clients in the end of May. However, many of the former clients of the retail FX broker who have gotten their money back are having questions over the sum received.
The Joint Special Administrators from KPMG today issued an update, trying to clarify some of the reasons for the difference in the sum received by some traders and the sum agreed on the Claims Portal.
The first possible factor is the currency denomination of the client money entitlement (client money pool) and the contractual claim.
The denomination of the Client Money Pool (“CMP”) is USD, therefore all clients’ account balances which were not held in USD are required to be converted to USD. The law states the conversion should be according to the spot rate prevailing at the time of the appointment of the Joint Special Administrators, which is 2.45 pm GMT, on January 19, 2015. This amount is the client money entitlement and payment in respect of this claim would be paid in USD, as that is the denomination of the CMP.
The contractual claim amount relates to any unsecured contractual claim the clients may have against the Company arising out of the Client Agreement. The designation of the general estate is GBP, therefore all claims in the general estate of the Company are required to be converted to GBP. This is, by law, at the official exchange rate, which is the mean of the buying and selling spot rates prevailing in the London market as published at the close of business on 19 January 2015.
Another factor: the amount recovered from the CMP under client money entitlement would reduce the value of one’s contractual claim by an equivalent amount.
As a result traders cannot recover both the full amount of their client money entitlement and the full amount of their contractual claim.
FSCS will make all payments in USD
FSCS has decided to pay all compensation payments in USD to align with the denomination of the CMP. As such, FSCS would have made a compensation payment to clients in USD. FSCS will pay out on the higher of a clients’ client money entitlement or contractual claim, however payment will always be made in USD.
Bank’s fees and account settings
The reason why a client may receive a different amount to that in the Claims Portal, according to KPMG, is due to a clients’ bank converting the USD payment into the denomination of the nominated bank account and further a clients’ bank may deduct fees.
To view the original announcement by KPMG, click here.