Regulation  

FSCS pays ‘top up’ compensation to MF Global investors

The Financial Services Compensation Scheme will now be making payments to investors of failed stockbroker MF Global that are due ‘top up’ compensation, following a recent court decision.

A recent High Court decision cited a £35m shortfall in liquidation values meaning that some MF Global investors are due more compensation.

In the judgement, Mr Justice David Richards ruled that “decreased clients” - a term used to refer to one of two defined groups of clients that were deemed to have lower-value claims - were entitled to prove their “excess shortfall”.

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At the end of October 2011, MF Global UK was put into the special administration programme, with the 31 October set as the valuation date for claims against the client money trusts. Those clients whose open positions closed after this date with a liquidation value less than their market value at the valuation date were defined by the court as ‘decreased clients’.

MF Global is one of four firms to enter the special administration scheme. previously placed into the regime since the regulations came into force in February 2011 were Fyshe Horton Finney Stockbrokers, Worldspreads Ltd and Pritchard Stockbrokers Ltd.

The ‘special administration regime’ came into effect in February 2011. In December 2012, HM Treasury announced that it is launching a review of the regime, looking into whether the regulations achieve their objectives and whether they should continue to take affect.

In a statement, the FSCS said: “Further to our previous update, we will now be making payments to customers of MF Global that are due ‘top-up’ compensation. The payments will be distributed to investors throughout this week. This follows the recent court decision referred to in our update of 27 September.

“We will provide additional updates for investors we are not yet in a position to pay in due course.”