UK MPs are being asked to support an early day motion which blames the collapse of Kaupthing Singer & Friedlander’s Isle of Man operation on the FSA’s decision to revoke the Icelandic bank’s UK deposit-taking licence.
The motion also attacks offshore life companies for their role in what Liberal Democrat MP Bob Russell alleges was "mis-selling" of their products, which he claims included misleading description of deposits in Kaupthing as "low risk".
In his motion, which was tabled yesterday by the MP for Colchester, Russell calls on the UK government to “intervene directly” and for the Isle of Man authorities “to ensure all depositors receive full compensation, in line with UK depositors”.
It also says the 10 life companies that “mis-sold over 1,000 bondholders in KSFIOM" should "re-evaluate their businesses and marketing practices and recompense policyholders accordingly”, noting that theirs was billed as a “low risk” product “offering capital security”.
The motion concludes by urging the UK’s Ministry of Justice to explore "whether the Isle of Man has the necessary skills, experience or processes in place to ensure effective self-regulation, as well as the conflicts of interest of those holding positions in the Isle of Man’s political, judicial, regulatory bodies and financial services industry".
Russell said in an interview that he had been prompted to take action in response to people in his constituency and others who had complained to him about having lost money in what he described as “the financial equivalent of the Bermuda triangle”.
“These are innocent people,” he said.
“The Isle of Man government, the Icelandic government and the UK government should get round a table and resolve the matter in a professional way.”
Charges ‘nothing new’
Director of the Isle of Man Treasury’s Financial Services Division John Spellman said Russell’s comments were “nothing new”, but that depositors whose savings were covered by the island’s depositors’ compensation scheme had already received their money, and that the remainder was being paid out in installments.
The depositors’ compensation scheme entitled individual investors to up to £50,000 each, with institutions eligible for up to £20,000.
Spellman said 40p in the pound of the remaining deposits not covered by the DCS, including money owed to depositors whose investments were held in insurance bonds, will have been paid out by the end of December, with more expected as the liquidation process continued.
“The conservative estimate of the amount likely to be recovered in this way is still 75p in the pound, but with stronger recovery expected from the UK, and money still coming, in there is some hope that more will turn up. “This is certainly not the end of it."
Not all paid
A spokesman for the Kaupthing Singer & Friedlander Isle of Man Depositors Action Group said: "Not all depositors who have claimed DCS payments have been paid. Even though [their] claims were made in June 2009, some are still trying to contact KPMG [the compensation scheme administrators] to find out what the hold-up is."
The spokesman added: "The latest predictions on recovery estimate that anyone with over £50,000 [on deposit in KSF(IoM)] or a bond will be waiting until 2017 for the final dividend, and still won’t be recompensed in full. The funds of innocent depositors will have been exposed to eight years of depreciation and professional fees by then."
The Depositors Action Group did not hold the FSA responsible for KSF(IoM)’s failure, he continued, "but we need the UK government to note that the decision by the FSA to remove KS&F’s UK deposit-taking licence led to the ultimate collapse of Kaupthing Singer & Friedlander (Isle of Man)."
EDM ‘could make a difference’
Early day motions are position statements that don’t always lead to action. But Russell said his EDM “could make a difference” if enough UK citizens contacted their MPs and urged them to support it. They will be able to do so until the next election is called, he said.
Russell’s EDM is available on the UK Parliament’s website at http://edmi.parliament.uk/EDMi/EDMDetails.aspx?EDMID=40046&SESSION=903 .
Russell’s call for UK intervention in KSF(IoM) coincides with media reports this morning that the Serious Fraud Office is planning to launch a formal investigation into Kaupthing after conducting months of preliminary inquiry.
Below is the full text of Russell’s EDM:
EDM 474
KAUPTHING SINGER & FRIEDLANDER ISLE OF MAN DEPOSITORS AND BONDHOLDERS
That this House recognises the decision by the Financial Services Authority (FSA) to revoke Kaupthing Singer & Friedlander UK’s (KSF UK) deposit-taking licence led to the ultimate collapse of Kaupthing Singer & Friedlander Isle of Man (KSFIOM);
notes that the decision taken by KSFIOM’s directors to transfer over 50% of assets to KSF UK, which was approved by the Financial Supervision Commission following extensive consultation with the FSA, contravenes both UK and European banking practice;
further recognises that some 3,000 KSFIOM depositors with savings above the £50,000 compensation threshold, many of whom are British pensioners, are yet to be fully recompensed;
further notes that British offshore depositors remit tax to the UK via income declaration or withholding tax and are therefore deserving of action by the Government;
asks the Government to intervene directly and calls on the Isle of Man authorities to ensure all depositors receive full compensation, in line with UK depositors;
further calls on the 10 life companies that mis-sold over 1,000 bondholders in KSFIOM, a product offering capital security, low risk and regular income potential, to re-evaluate their businesses and marketing practices and recompense policyholders accordingly;
and requests that the Ministry of Justice further investigates whether the Isle of Man has the necessary skills, experience or processes in place to ensure effective self-regulation, as well as the conflicts of interest of those holding positions in the Isle of Man’s political, judicial, regulatory bodies and financial services industry.
