Manx Herald 22 April 09: KSF (IOM) DAG Unconvinced voting ‘Yes’ to SoA is an option

Category: Newspaper & Media Reports
Tue, 21/04/2009

In fact many DAG members still believe depositors, with over £50,000 at stake, are disadvantaged by the proposed SoA and are actively campaigning for a ‘No’ vote; even though all DAG members are still 100% united in calling for the Treasury to guarantee 100% return of their money.

The Kaupthing Singer & Friedlander (IOM) Ltd Depositors Action Group (DAG) has published an opinion that concludes that, on advice, they cannot recommend approval to members of the Scheme of Arrangement (SoA) put forward by the Treasury.

DAG still maintain there is no clear advantage of voting for the SoA – which has apparently been described as ‘liquidation plus’ by a Treasury representative - in favour of a traditional liquidation and a triggering of the Depositors Compensation Scheme (DCS).

In fact many DAG members still believe depositors, with over £50,000 at stake, are disadvantaged by the proposed SoA and are actively campaigning for a ‘No’ vote; even though all DAG members are still 100% united in calling for the Treasury to guarantee 100% return of their money.

Letters have been sent by DAG’s English lawyers, Edwin Coe to the Financial Supervision Commission (FSC), John Spellman at IOM Finance, and Mike Simpson, provision liquidator at PWC urging a variety of actions to be taken; including the disclosure of documents, relating to the transfer of the deposit to the sister bank in the UK, and improved terms in the SoA for depositors.

The letters to Messer Spellman and Simpson make it clear that assurances are required that the right to pursue legal action against third parties is protected; and that DAG is anticipating this power will be used to pursue any parties believed to be at fault for the collapse of KSF (IOM).

The letter to Mr Simpson points out DAG considers some of the actions by the FSC, on the evidence so far available, as evidently negligent and possibly at worst amount to misfeasance. The directors of KSF (IOM) have already been put on notice that legal action against them may follow, to recover any losses, if depositors do not receive 100% return of their money.

The Manx Herald has been informed by several individual depositors that they will not flinch from pursuing legal claims against any party they consider culpable in the demise of the bank, and the loss of their money.

Depositors are also still disgusted by the Treasury’s reaction to the problems with KSF (IOM) and their revelation that the much vaunted IOM DCS is essentially ‘not fit for purpose’.

When Treasury Minister Allan Bell introduced an amended DCS scheme, on the 9th October 2008, following the announcement that KSF (IOM) Ltd was facing failure, he informed Tynwald: “Mr President, the urgent priority in bringing this amended Scheme today has been to protect and reassure the individual depositor.”

He went on to say it was his intention “to make sure that all the details of the Scheme meet our objectives”; presumably to protect depositors.

Moreover, he added: “we will provide a Compensation Scheme that is up-to-date, and stands comparison with much larger countries … It will give increased confidence to our local and international investors. Mr President, I commend the new Scheme to this Hon.Court”.

It now appears these were very much hollow words and meant nothing; even if they were, at the time, met with enthusiasm by his Tynwald colleagues; who almost universally agreed what a wonderful new scheme it was and how much assurance it would give investors. The vote in favour of the Scheme was unanimous.

As it stands today it appears that the DCS guarantees a depositor nothing; and is it any wonder that Michael Foot, conducting an independent review in to the Crown Dependencies, says in his interim report, published in the last few days, that a review is required of the coverage of a DCS and the mechanism for funding it.

Meanwhile, this morning (Wed. 22nd April), Tynwald approved, from a Supplementary Order Paper, a set of Regulations that is proposed to be used in the event the SoA gains approval, which will require depositor takers, in the IOM, to contribute the same amount to the SoA as they would under the DCS. It appears though, if the Regulations are ‘triggered’ they will not immediately have to dip their hands in to the banks funds, but their contributions will be lent to them by the government and paid back sometime in the future! On the face it, it seems a very rum deal; and again appears to offer no additional or tangible benefit to depositors in KSF (IOM); but will presumably come with a potential cost to the taxpayer in the IOM.

How matters develop in the coming weeks is difficult to access, but judging by what has so far we are surely still in for a few new surprises yet.

DAG will shortly be running their own ‘helpline’ for depositors who want information, about the SoA, prior to deciding how to cast their vote. This decision was partly taken following the ‘discovery’ of potentially ‘misleading’ information on the ‘official’ IoMT advice/information site.

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