Application process for AFX Markets compensation to start in a few weeks
Further to the recent announcement by the UK Financial Services Compensation Scheme (FSCS) that customers of retail FX broker AFX Markets may be eligible for compensation, the Scheme has updated on the application process for such compensation.
FSCS says it is going to take a few weeks to get the process and some of the materials ready to ensure that claims can be dealt with efficiently. The Scheme will make a further announcement when it is ready to begin the application process.
“The situation involving AFX is complicated. We have worked very closely with the Joint Special Administrators over this period. It has taken some time to work through the various issues. This work has led us to conclude that a case by case approach is the right one to adopt here”, FSCS stated.
On 31 July 2019, as a result of concerns over AFX Markets’ financial position and its arrangements for safeguarding monies held on behalf of its clients, the UK Financial Conduct Authority (FCA) required AFX Markets to cease conducting any regulated activities, except solely for the purpose of closing trading positions, and freezing all its assets.
Subsequently, the FCA made an application to the High Court to appoint special administrators under the Investment Bank Special Administration Regulations 2011. The application was made to protect the interests of the customers of AFX Markets by ensuring that a responsible official with lawful authority is appointed to take control of the affairs of the company. The special administrators will attempt to reconcile and distribute the client monies as quickly as practicable.
The special administration order was made by the High Court on 27 August 2019, appointing insolvency practitioners from CG Recovery Limited as special administrators of AFX Markets.
In the meantime, the adversary proceedings against AFX Capital Markets brought by the Chapter 11 trustee of Avenica and Gallant Capital Markets keep getting delayed. The complaint, filed with the New York Eastern Bankruptcy Court, alleges that in 2015 and 2016, Gallant Capital Markets deposited about $2.35 million into a Gallant account maintained at AFX. About two weeks before Gallant commenced its bankruptcy case, there was a balance of approximately $2.4 million in the Gallant account at AFX. Back then, Gallant requested several times that AFX returned Gallant’s funds. These requests, however, were disregarded.
The complaint further alleges that AFX withdrew the remaining balance, lacking any authorization and without any basis, in violation of the automatic stay. In these adversary proceedings, the Trustee seeks a turnover of Gallant property and recovery of assets of the Gallant estate.