FCA-regulated Sova Capital, which operates as a wholesale broker, entered into special administration as it was facing severe liquidity problems due to the downward spiralling Russian financial market.
Sova is owned by Russian billionaire banker Roman Avdeev and offers trading and execution services as well as access to Russian markets. Its businesses are strongly dependent on transactions linked to Russia and Russian assets.
The broker, previously called Otkritie Capital International Limited, moved its headquarters to London in 2015 but has a large presence in Russia.
The directors of the brokerage firm decided to put the company into insolvency after considering its financial positions and assessing the risks.
“You will be aware that Sova Capital is experiencing some liquidity issues arising out of the unusual circumstances currently existing. We should like to inform you, however, that our team is making every effort to stabilize the situation and ensure that business continues smoothly,” Sova wrote in a business update.
Can It Avoid Collapse?
The court-appointed special administrators will now assess the clients' money and custody assets held by the firm to confirm its current position. In addition, they will approach clients of the firm with their proposals and detail the process of claims.
According to the lawyers of the Sova, the broker holds more than £1.5 billion (around $2 billion) of clients' assets and £50 million of clients' money. Though neither Sova nor its owner Avdeev is facing western sanctions, the company is unable to make debt payments due to its ‘significant exposure to Russian interests’.
It can not receive a cash injection from its shareholders due to the rampant sanctions on Russian financial institutions.
“We are entering a period of special administration during which the Administrator appointed by the Board will assist in the process of helping Sova Capital manage this difficult situation and fulfil its commitments to clients and counterparties,” the broker added.
