KPMG ADMINISTRATORS have been appointed to spread betting company Worldspreads, following the discovery of accounting errors which has left a £12m black hole in client accounts.
Jane Moriarty and Samantha Bewick, partners at KPMG, were appointed joint special administrators of Worldspreads, the UK spread betting business and wholly owned subsidiary of Worldspreads, a Dublin incorporated company.
The Financial Service Authority’s Special Administrations (SARs), which was introduced last year, are designed to return client money quicker in the collapse of a financial service provider, than regular insolvencies.
Shares of Worldspreads were suspended on Friday after the company told authorities about the discovery of accounting irregularities. Funds from client accounts, which should have been segregated, was mixed with the company’s own funds, The Financial Times reports.
Finance director Niall O’Kelly and chief executive Conor Foley left the business earlier this month. The accounting irregularities were discovered by the new chief executive who was inspecting the accounts, chairman Lindsay McNeile said.
It is likely auditors Ernst & Young will come under fire for signing off on annual accounts when the irregularities were taking place.
KPMG’s Moriarty said: “The administration follows the discovery of accounting irregularities, which the company became aware of during the course of Friday 16th March 2012.
“It soon became apparent that there was a shortfall in client monies and, in order to mitigate losses for clients, the directors applied to court for the appointment of special administrators.”
It is estimated the company has 15,000 clients accounts, however, due to the accounting irregularities it is likely there will be a shortfall in repayments to clients.
Worldspreads currently employs about 66 staff with some likely to be retained by the special administrators to help wind down the business.
The SAR process entails the administrators completing three tasks: making a swift return of client assets; timely engagement with authorities; and to rescue the business as a going concern, or to wind it up in the best interests of the creditors. A regular administration involves the latter, but not the first two objectives.
SARs were brought about to help creditors caught up in complex insolvencies receive their funds quicker. The collapse of investment bank Lehman Brothers at the back end of 2008 saw its administrators tied up in heavy litigation resulting in some creditors waiting years before they received any payment.
Despite concerns over the viability of BHS, advisers including Grant Thornton were paid in the millions of pounds for their roles, according to the Work and Pensions and Business, Innovation and Skills Select Committees
Colin ponders how the Pokemon craze is permeating the world of accountancy
The UK’s decision to leave the EU has raised questions about whether the FRC's regulatory framework should change in the future
Manufacturer DMG Steelworkers has been sold out of administration in a pre-pack deal by insolvency and restructuring firm CVR Global