04 May 2012
MarketSpreads, an Irish spread betting firm that has been under review by the Central Bank, has returned to normal operations after the Bank lifted the trading suspension.
Earlier in the year, the Irish Central Bank asked the spread betting provider to inject €2.8 million into the business in order to satisfy capital adequacy regulations. Although management has accomplished to solve the situation, at the beginning of April the Central Bank decided to suspend the trading license of the company after the independent auditor refused to sign some company financial statements.
MarketSpreads was born from a split of WorldSpreads. According to MarketSpreads, financial statements for the period immediately prior to the management buyout that occurred at the end of 2009, misrepresented the company reality and were the main reason for the trading suspension. Along the process, management has been reiterating that they were deceived by WorldSpreads regarding the company assets but that client funds were perfectly safe and segregated.
Upon the downfall of WorldSpreads, the Central Bank didn’t want to take any chances and blocked trading and client pending withdrawals. A few days later, the revision of accounts by the company Grant Thornton led the Central Bank to authorise MarketSpreads to process all pending withdrawals. Finally, on Friday April 27th, the company said in a statement: “The Central Bank of Ireland has just officially lifted the suspension saying it’s satisfied with the steps which the firm has taken to address its legacy financial issues. From Sunday night, April 29th, at 11pm, the MarketSpreads desk will be ready, willing and able to execute trades.”
MarketSpreads is back to business and clients can trade again. Although this process will have substantial costs for the Irish spread betting provider in terms of lost clients and lost profits for being closed for several days, the company has the advantage of offering now more safety to current and prospective clients due to the inspection made by an institution as the Central Bank.
12 Apr 2012
MarketSpreads, the pioneer Irish spread betting company, has been under review by the Irish Central Bank after independent auditors refused to sign old accounts. Client funds were frozen last Thursday but will now be unlocked again.
MarketSpreads has been under scrutiny since the beginning of the year. At first, in January, the central bank asked the company to inject €2.8 million into the business to satisfy capital adequacy regulations. At that time, management decided to convert €2.4 million in loans to preference shares and to use €1.4 million from a payment it had withheld from WorldSpreads, in order to fulfil the central bank requirements. With these steps MarketSpreads management thought it had solved the matter with the central bank but was caught off guard last week when the central bank decided to suspend the company trading license.
The central bank decided to suspend all MarketSpreads operations, including any pending client withdrawals, after the independent auditors refused to sign some company accounts. The central bank was concerned about the possibility of financial statements misrepresenting the company reality and assets being not enough to repay clients. A few days later, Grant Thornton, the independent auditor responsible for the full verification of accounts has stated that everything is clear. According to MarketSpreads, the Grant Thornton report received by the central bank yesterday stated that: “There are sufficient assets in client bank and custodian accounts to meet all client obligations… We are also satisfied that amounts due to clients are held in segregated client bank accounts”.
After receiving the Grant Thornton report, the central bank has authorised MarketSpreads to process any pending client withdrawals. During this afternoon MarketSpreads management will meet with the central bank in order to clear any pending matters and get back its trading license to restart normal operations as soon as possible.
MarketSpreads was acquired from WorldSpreads in a management buyout in December 2009. It seems that MarketSpreads has been another victim of WorldSpreads, the recently bankrupted spread betting firm that missed on the segregation of client funds. What led to the central bank suspension were the financial statements for the 9-month period immediately prior to the acquisition. According to current management, as the financial statements were being compiled, many issues emerged that forced them to restate previously published figures and write down assets by €7 million. This fact led MarketSpreads to sue WorldSpreads for fraudulent misrepresentation of financial statements and the company refused to honour the last €1.4 million payment regarding the management buyout.
During all this process initiated by the central bank, management from MarketSpreads has been repeatedly stating that the company is profitable and segregates all client funds, separating them from the company own funds. The auditors’ report proves they have been acting honestly and were unfairly hit by the WorldSpreads wave. Although everything is clear now, many clients may have requested their funds and just want to walk away scared by all the mess.