The collapse of Australian online stockbroker Halifax Investment Services could reportedly leave investors $25 million out of pocket.
The company went into administration at the end of last year, forcing $211 million of client investments to be frozen. ASIC then suspended its financial services licence.
Administrators Ferrier Hodgson has since estimated the business doesn’t have enough assets to be able to pay out that entire balance, meaning investors could be up to $25 million out of pocket.
The exact shortfall figure is not yet known because a number of investor positions are still open and the value is subject to change with market and currency fluctuations.
Halifax ran three online trading platforms: MetaTrader 4, MetaTrader 5 and Interactive Brokers.
According to Ferrier Hodgson, there are serious hurdles in reconciling investor money, with the three sources being mixed together.
“While the [Interactive Brokers] platform may be ‘whole’ in that it is fully funded, investor funds have been mixed or co-mingled in such a way that the taint affects the claims of all investors on all three platforms in both the Australian and New Zealand businesses,” the administrator said to creditors.
“The process of allocating and tracing individual investor funds will likely be a complex and lengthy process.”
ASIC ban frees up some cash
Halifax held a $1.6 million term deposit to cover capital requirements put on by ASIC’s financial services licence.
But with that licence now suspended, the administrators have requested the Federal Court free up the money to keep the trading platforms going.
“Given the extent of the co-mingling of investor and company funds, we believed that it would be prudent to seek the court’s determination on these funds to ratify that they may be used to meet various trading expenses including payment of platform costs, suppliers, rent and wages,” Ferrier Hodgson stated.
“Please note that the order does not extend to payment of legal fees or payment of the remuneration of the administrators.”
A second meeting of creditors and investors will be held in the coming weeks to decide whether a deed of company arrangement can be executed to keep the business going in the hope that more of the investors’ money could be recovered – or if Halifax and Halifax New Zealand should be liquidated.
Ferrier Hodgson also stated that there may be insurance policies held by the company that could be used to recover investors’ money.
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