DSC Manager Correspondence with Edwin Coe 17/6/09

DSC Manager Correspondence with Edwin Coe 17/6/09

Mr Greene

Re: Kaupthing Singer & Friedlander (Isle of Man) Limited (“KSF”)
Financial Supervision Commission (“the Commission”)
Depositors Compensation Scheme (“DCS”)

Thank you for your email of the 11th June 2009.

Firstly, I can confirm for the avoidance of doubt that it is the expressed and current intention of the Scheme Manager to pay either the full £50,000.00 or £20,000.00 as applicable by making one payment within 3 months of the date of default. As you will appreciate, the ability to pay in this manner is not within the immediate gift of the Scheme Manager but we remain hopeful that this can be achieved. We suggest that depositors visit the DCS website from time to time and we will post any material updates to this issue as soon as we are able.

I note your proposition that the Regulation is not as clear as I stated. I also note your comments in relation to the meaning of “liability” and the effect of the regulations; however, as I indicated in my earlier correspondence the Scheme Manager’s position remains that for a claimant to claim in the DCS the claimant must assign all rights. The assignments contained in the claim form reflect this position.

As we have already indicated, I confirm that the Scheme Manager intends to ask the liquidator to re-direct any future “surplus” dividends directly to depositors to avoid administrative duplication. Upon request, the Scheme Manager would also be prepared in principle to re-assign rights back to a depositor once a position of “surplus” has been reached (this position is also reflected in the claim form). The reason the re-assignment would only be made upon request is that in connection with previous schemes a significant amount of administrative time and effort was made contacting claimants to ascertain whether they wished their rights to be re-assigned. Many claimants did not respond, or after having indicated that they wished to obtain a re-assignment did not then complete the re-assignment forms. Many claimants therefore may well be satisfied with the re-direction process but, for the avoidance of doubt, the Scheme Manager would in principle, be content to re-assign once the scheme payment and recovery process has been completed.

In relation to your query regarding accrued interest, you are correct that the Scheme Manager’s assertion is that the effect of clause 9 (4)(a) is to prevent the accrual of interest beyond the date of the presentation of the winding up petition, i.e. the 9th October 2008. We note however your interpretation and we confirm that we are considering whether it is appropriate to make an application to the High Court pursuant to Section 16B in relation to this point. We assume you would support the making of application in this regard so that this issue can be resolved by the Court?

In relation to the numbered paragraphs, I comment as follows:-

  1.   It is the Scheme Manager’s current intention not to apply any costs of recovery that might be identified by Clause 16 (5)(b); the agreement of other interested parties is being sought before this intention can be confirmed as policy. 
    
  2.   The depositors are being asked to lodge their claims by the 4th July 2009 (this amended date will be updated on DCS website shortly).  If the depositors lodge their claims by the 4th July, the Scheme Manger has indicated that such depositors will be in the first batch of payments made (assuming there are no obstacles to full acceptance of their claim).  I am however aware that some depositors may wish to vote at the first meeting of creditors on the 7th July 2009. These depositors would be free to delay in lodging their DCS claims in order to enable them to vote on the 7th July 2009, but they may have to accept a further short delay in receiving compensation. The DCS website will be updated to explain this matter to depositors. 
    
  3.   As you are aware the DCS Regulations provide for Treasury and “participant” funding for the DCS up to prescribed limits. Additional funding would be necessary to secure full payment of compensation in one payment, and Tynwald approval for this would be required.   
    
  4.   The Scheme Manager’s position in relation to the first meeting of creditors remains under consideration.   
    

If I may, I would repeat my request that you use mfayle(?)kpmg [dot] co [dot] im for any further correspondence to ensure that I attend to it immediately.

Regards

Mike Fayle
Scheme Agent

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