Money held in trust for clients of failed stockbroker BBY are suspected to be missing, according to investigations by the administrator.
“We have concerns that there could be a shortfall in funds held in trust on behalf of BBY clients,” say Stephen Vaughan and Ian Hall of KPMG Australia. “We are now forensically reconciling the extent of this gap.”
BBY went into administration on May 18 under the weight of increasing liabilities from its options trading business. All 170 staff have been made redundant and are all creditors. Some have been rehired at AIMS Financial which has acquired some of the broker’s assets.
The administrators and the receivers, Stephen Parbery and Brett Lord of PPB Advisory, are trying to assess the extent of the damage.
Stephen Vaughan and Ian Hall at KPMG Australia say investigations are being hampered by the poor state of the BBY group’s financial records and a high volume of unprocessed transactions.
“Once our investigation is complete, it is likely that we will need to apply to the courts for directions regarding the methodology to be used to determine individual client and creditor entitlements,” say Vaughan and Hall.
The administrators are preparing a formal report to creditors ahead of a second creditors’ meeting expected late this month.
At the first creditors meeting last week, KPMG said it couldn’t yet put a total figure on the liabilities. “Any number we could give will be wrong,” they said.
There are 55,000 client accounts but the administrators are still trying to find out how many of these are active.
Some payments made by BBY in the final days before going into administration may be clawed back under the Corporations Act.
Under certain circumstances, money can be recovered if it can be shown that unfair preference was given by a company to a creditor.
“Further investigations will be undertaken in respect of these transactions prior to the second meeting of creditors,” according to the slide deck shown by KPMG to creditors. “It is too early in our investigations for any further detail to be provided.”
KPMG has taken forensic copies of computer hard drives and seized documents.
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