According to documentation published by the special administrator of LQD Markets, Baker Tilly, the broker was on the verge of getting a Liquidity injection from new investors in the aftermath of the Swiss National Bank induced client money shortfall.
Due to the matched principal license under which LQD Markets operated, it incurred substantial losses after clients of the firm went into Negative Balance , dragging the brokerage’s credit line with the prime broker deep into negative territory.
After the firm notified the U.K. Financial Conduct Authority (FCA) about a client money shortfall totaling about $743,000 on January 19th, LQD Markets obtained a capital pledge to the tune of $1.2 million. The sum was to be injected to cover the client money shortfall and provide an additional capital buffer for the operations of the firm on the 28th of January.
Just a couple of days before the injection, on Sunday, January the 25th, the broker got hit with another massive capital loss resulting from an error on its platform just as the Asian markets were opening for the Monday morning trading session around 23:00 GMT.
As a result, the company lost an additional $536,000 and the investors who had committed to the capital injection withdrew from the deal.
Additional Client Funds Missing
After the event, the company filed for bankruptcy and Baker Tilly got appointed as a special administrator for LQD Markets on the 2nd of February. After the appointment, the company retained two employees and the director of the insolvent brokerage in order to assist with the insolvency process.
According to the document published by Baker Tilly, the company held 10 client money accounts at Santander UK and five at Barclays, with client moneys designated into these omnibus accounts. On the date of the appointment of the special administrator the broker held almost $2.2 million, whilst the total amount owed to clients was $3.55 million.
With the client money shortfall totaling $1.355 million, Baker Tilly urged clients of the company to submit copies of their most recent statements in order to verify their claims and confirm deficits to the FCA and the Financial Services Compensation Scheme (FSCS).
Until present time, the reconciliation procedure which has been conducted by the special administrator has established that 137 accounts have been missing from the initial consideration, which resulted in almost $1.5 million of additional losses. The figure takes the total deficit in client funds to about $2.83 million.
Sale Opportunity Gone & Clients' Negative Balances Pending
Before and after the special administrators took control of LQD Markets, the firm was approached by a number of entities looking to acquire the broker’s business. After a serious offer was put on the table, the FCA was contacted to assess the prospects of a sale.
Right after the process began, the news about additional missing client funds would most likely stop any prospective sale, according to the estimates made by Baker Tilly.
In the aftermath of the SNB move, a total of 31 clients of the company have accumulated $569,784 in negative balances. After final statements are issued to the clients in question they will be contacted in order to obtain settlement.
Clients of LQD Markets who are awaiting further details about the process of recovering their funds will have to await confirmation from the FSCS about the qualifying criteria entitling them to compensation from the Compensation Scheme.
All clients of the broker will be notified by the special administrator when the confirmation is received from the FSCS on the following link. A clients and creditors' meeting is scheduled for 10.00 AM on the 10th of April at The Royal Horseguards Hotel in London.
