UK FCA-regulated LQD Markets goes belly up; withdrawals halted

[babyjake1961]

Here's a notice from the LQD Markets website:

Important notice for the attention of existing and prospective clients

Following the decision by the Swiss National Bank to remove the informal peg between the Swiss franc and the euro, which prompted volatility across the foreign exchange markets, LQD Markets (UK) Limited ("LQD") has experienced trading difficulties and has been in close liaison with the Financial Conduct Authority ("FCA") about this.

Following consultation with the FCA and professional advisers, on 27 January 2015 LQD applied to the FCA for a number of requirements to be imposed on LQD and its business. Following this application, the FCA placed these requirements on LQD’s permission (which is available for inspection on the Financial Services Register). These requirements include a requirement that LQD:

cease carrying on any business that involves the carrying on of any regulated activities.
terminate any existing derivative contracts to which it is a party (whether as agent or principal).
In compliance with these requirements, LQD is no longer able to enter into any transactions or carry on any other business with clients and the open positions of any existing clients in derivative transactions are being closed immediately. Clients can obtain further information about these transactions by logging in to their client account.

Any further material developments will be notified by further notice on this website and by messages accessible through client accounts.

Needless to say, no further information has been communicated through the website's client area so far. All withdrawal requests are no longer processed despite the brokerage having alleged to hold client funds in segregated accounts: http://www.lqdmarkets.com/About-Us/Regulations/segregation-of-accounts

What to expect?

 

[tomorton]

Hopefully this is just a temporary lock-down of accounts to permit their segregation to be properly verified.

Still, it must be worrying for LQD clients.

 

[babyjake1961]

Hopefully this is just a temporary lock-down of accounts to permit their segregation to be properly verified.

Still, it must be worrying for LQD clients.

The LQD Markets customer support has proven unable to provide any clarification on the matter. In particular, they give no response as to why client funds cannot be withdrawn from the segregated accounts following the announcement of the company's liquidation.

 

[tomorton]

What I'm thinking is LQD are going to be faced with securing independent corroboration that the clients' accounts really have been segregated. That can't be arranged and carried out instantly, and the FCA and the firm's lawyers will probably have to give a judgement - can't see them doing any work over a weekend. So it makes sense that withdrawals are temporarily blocked (and deposits also blocked or held back) while the check is organised so it will reveal the actual state of client funds management, while nobody has the chance to make a last score and run for it, nor to re-balance the books with a quick injection of cash.

Its hopefully just a formality, like when the police secure the scene of an accident - it doesn't mean anyone's been negligent, but it still has to be verified it was a pure accident.

Hope I'm not being too optimistic and clients do get their funds back.

 

[babyjake1961]

What I'm thinking is LQD are going to be faced with securing independent corroboration that the clients' accounts really have been segregated. That can't be arranged and carried out instantly, and the FCA and the firm's lawyers will probably have to give a judgement - can't see them doing any work over a weekend. So it makes sense that withdrawals are temporarily blocked (and deposits also blocked or held back) while the check is organised so it will reveal the actual state of client funds management, while nobody has the chance to make a last score and run for it, nor to re-balance the books with a quick injection of cash.

Its hopefully just a formality, like when the police secure the scene of an accident - it doesn't mean anyone's been negligent, but it still has to be verified it was a pure accident.

Hope I'm not being too optimistic and clients do get their funds back.

The brokerage posted the above announcement on their website on January 27 - yet until this day there's no mention about it whatsoever in the UK FCA website's news section: http://www.fca.org.uk/news/list

Should it turn out that the client funds were not entirely held in segregated accounts, it will be a deafening blow to the British financial regulators' reputation and credibility.