Offshore bonds offer none of their much-vaunted safety and security - even life companies finally need to admit this vehicle is not fit and proper for the task.
Offshore bonds offer none of their much-vaunted safety and security - even life companies finally need to admit this vehicle is not fit and proper for the task.
Offshore bonds offer none of their much-vaunted safety and security –
even life companies finally need to admit this vehicle is not fit and
proper for the task.
The life companies offering these have so far failed to use their
collective weight effectively. Household names such as Axa, Aegon
Scottish Equitable and Norwich Union appear to have done little to
secure the full repayment of £300 million tied up in KSFIOM on behalf
of 1,970 of their bond holders.
Furthermore they have now deposited the £10,000 claimed from the early
payment scheme back in the individual client bonds and are using this
to cover their own high administration charges. These were acceptable
when the deposited funds were available to bondholders, but seem
somewhat insulting given the current financial predicament.
Depositors continue to be dismayed by the role played by many senior
Isle of Man politicians in the demise of the bank and their failure to
provide a suitable 100% solution for depositors. Mr Donald Gelling who
is a Director of KSFIOM, Chair of the Island's Insurance and Pensions
Authority (IPA) and former Chief Minister of the Isle of Man has some
very real personal confli
cts of interest to overcome. He must have had
prior knowledge that over 50% of KSFIOM funds had been transferred to
KSF in the UK. Yet clearly did little in his role within the IPA to
protect bondholders with funds deposited in KSFIOM from this risk.
The life companies thought bondholders’ money was ring fenced – and
told their bondholders as such. But since KSF collapsed the life
companies have not pushed for full recompense for depositors, nor
instigated a legal review of third party liability. In fact they went
out of their way to support a doomed attempt by the Isle of Man
Government to introduce a sub-standard Scheme of Arrangement (SoA)
that would have potentially offered bondholders less than they would
receive under liquidation while limiting their legal rights. A strange
course of action given this support now looks likely to leave the
bank carrying the liquidators’ costs for the promotion of the SoA on
the basis that such support from the life companies had been openly
offered.
Axa Isle of Man Managing Director Mike Foy has been quoted as saying
“We share the Depositor Action Group’s (DAG) desire to see 100%
recovery for its members. From discussions with the DAG it is clear
they wanted to retain the right to legal recourse at some point in the
future and were concerned that accepting the Scheme of Arrangement
would affect this.”
Despite numerous attempts by the Depositors Action Group to per
suade
the life companies to align themselves with DAG members many of whom
are bondholders, only Axa has opened limited dialogue during the last
eight months. The DAG would like to see more evidence of this shared
desire for 100% return and also is looking for support to ensure that
the DAG is represented on the Creditors’ Committee at the expense of
the Isle of Man Financial Supervision Commission (FSC). It is using
the vagaries of its own Depositors Compensation Scheme (DCS) to
collect the full value of claimants deposits, not just the £50,000 it
will ultimately be paying them. More twists and turns in the workings
of the Isle of Man, its regulatory authority and it’s outdated
political system.
What depositors find particularly galling is that whilst the life
companies are not willing to take responsibility for the placing of
funds, despite the bank being advertised on their respective deposit
takers ‘panel’ with a AAA rating and a reference to a 100% parental
guarantee, they seem willing to continue to find ways to ensure that
they receive their charges from bondholders. Most who have little
money left and no definite prospect of its return, yet this is the
type of vehicle still promoted by life companies as a safe way to
guard bondholders’ money.
Clarity is clearly needed as to how such deposit taking vehicles can
form part of any sensible financial portfolio in the future. But first
and foremost, help is ne
eded for bondholders caught up in KSFIOM to
get 100% of their money back. Nothing less is good enough.
– Ends –
For more information email KSFIOMPress(?)googlemail [dot] com
Bondholder case study
A Personal Account By XXXXXXX – available to talk to the media
“After a complete breakdown a number of years ago, from the pressures
of running my own businesses, I eventually realised that I was never
going to be able to return to work in the same capacity as before.
I wound up one company, to concentrate on the main business, but in
the summer of 2007 my wife and I decided to re-evaluate our lives, so
decided to down-size our home, sell our assets, live off the proceeds,
and spend time with our grand-child (now children), and get involved
in various community projects; yes, the old cliché of giving something
back to society!
Many of our long standing work colleagues had become friends over the
years, and so it was a very emotional time as we closed the business
and sold the property, and in the spring of 2008 were looking forward
to a stress free lifestyle.
We had originally considered investing in property, but at that time
there were already some misgivings, and after consulting an IFA made
the decision to go for security and deposit the £1.2m we had amassed.
Part of this
decision was also based on the fact that I am responsible
for my brother, who has learning difficulties, and needed to feel that
I was in a position to provide for him as well.
In our new Northampton home we set about encouraging local initiatives
by setting up a Residents' Association, organising Clean Up campaigns,
getting graffiti removed, and were preparing to investigate an alley
way gating project, improving parking issues, etc.
We also became involved in a community festival at our local park, and
were looking into setting up youth / teenage projects to hopefully get
them involved in more positive interaction with their society, and had
started to research how we could be involved in providing better
social and sustainable housing.
With no previous knowledge of large investments our IFA led us to a
bond with Aegon Scottish Equitable International based in Dublin and
transfer two thirds into a 'safe' account with KSFIoM.
We decided not to take a holiday, but to be cautious until we were
happy with our lot. My wife had worked in the business, and so with
her redundancy money, together with the decision to sell her car
(reducing our carbon footprint) thought that we would let the money
stay within the scheme and allow our investment to grow.
Oh how quickly it all went wrong.
With absolutely no help coming from the welfare or employment schemes
run by government, and no prospects of employment at present, I am
working in
a distribution centre / warehouse on minimum wage. I have
cashed in my only existing pension (at completely the wrong time),
which will keep us afloat until November, and have had to explain to
my brother he needs to try to fend for himself for the foreseeable
future.
At least I have my health, well that is apart from being on
anti-depressants, and a worsening of type 2 diabetes, brought on by
stress.
All our visions have (at least) been put on hold and, in general, cancelled.
Is there any light at the end of the tunnel?
I can't even find the damn tunnel yet!