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The Unicorn AIM IHT & ISA Portfolio Service via Reyker

As you are probably aware the broker and Custodian for the above service, Reyker Securities Plc, entered into Administration on 7th October 2019.

As a consequence of this, the Unicorn AIM IHT & ISA Portfolio Service via Reyker must no longer be promoted and we confirm that all financial promotions relating to this service have now been withdrawn and should not be distributed in any form to any party whatsoever. If any of this promotional material is available on any website under your control it should be removed immediately. Our Financial Services Register has now been updated to confirm this. Updated promotional material for the service will be approved and issued by us in due course as soon as another firm has been appointed to undertake the execution of trades and to act as Custodian for the assets within the Service.

We have provided below answers to a number of the questions in relation to Reyker’s administration and will update this as and when there are material developments.

Frequently Asked Questions

Reyker Securities Plc, which acts as a custodian to the Unicorn AIM IHT & ISA Portfolio Service, went into administration on 7th October 2019.

Subsequently, Reyker ceased to conduct regulated activities except for holding and safeguarding client money and investment assets. This includes processing portfolio trade instructions on client accounts. At the current time, no withdrawals or transfers of client money or assets are being processed to ensure that all clients are treated equally.

On 8th October 2019, the Court appointed Mark Ford, Adam Stephens and Henry Shinners of Smith & Williamson LLP as joint Special Administrators of Reyker Securities Plc.

The Unicorn AIM IHT & ISA Portfolio Service itself remains open and available to new investment via 7IM, Standard Life and Transact. Please contact the sales team at LightTower Partners on investor-relations@lighttowerpartners.co.uk or call 020 7071 3920 for further information.

Yes. Reyker as a business had delivered an increasing profit according to their previous 5 audited accounts and there was no reason to believe that there were any issues with Reyker’s financial position.

The audited accounts prior to those published immediately before Reyker went into administration contained the following statement from the Chairman:

We have an impeccable regulatory record, our capital adequacy and solvency levels are at least three times what the FCA requires, which is clearly prudent, and we have very robust security over what we hold for clients. Our focus is on safety and integrity and we run the business in a prudent way. So, we remain cash generative, our balance sheet has grown and we have never made a loss in 34 years of trading, which includes at least two recessions. This is something all of us at Reyker are very proud of. It doesn’t happen by accident – it happens through being careful.

We don’t know for sure at this moment and this is being investigated by Smith & Williamson. However, we believe that a combination of Reyker’s capital expenditure on a number of projects combined with decreasing revenues meant that they were going to breach their capital adequacy requirement. This is the amount of money that the FCA stipulate must be held in account for these types of eventualities.

Unknown to us at the time, Reyker’s Directors had been pursuing a sale of the business.  However they were unable to complete this sale. Due to the firm’s financial difficulties the Directors concluded that the company was cash flow insolvent and, in discussion with the FCA, took steps to place the firm into Special Administration.

Your money remains invested however it cannot be traded at the current time. Reyker has ceased all operational activity at the current time. The Special Administrators’ key objective is to resolve this position as quickly as possible.

Any dividend income paid into Income Portfolios prior to Reyker’s Administration will not be distributed to clients until a full audit of all client money, as required by the FCA, has been completed.  The reconciliation of client accounts is due to be completed in January 2020 and therefore we expect to issue a further communication on this shortly.

Dividends received after Reyker’s liquidation on 7th October will not be paid into Reyker client accounts but into accounts controlled by the special administrators, which we believe should allow all dividends received since the liquidation to be paid to investors in both income and growth portfolios in early 2020 regardless of whether the audit has been completed or not. However, this has not yet materialised and the administrators have not been forthcoming on when this will happen, despite being pressed on the matter several times during the Creditor Committee Meeting in December 2019. We will update you as this develops.

Portfolio holdings are ring-fenced from Reyker’s own assets and remain unchanged from before Reyker went into Special Administration. We will continue to provide portfolio valuations and quarterly investor reporting.

Where shares are held in Business Relief qualifying companies, these will continue to be owned by clients and thus the two-year ‘clock’ will be unaffected.

The Special Administrators have said that they have no reason to believe that there is any shortfall in client money or assets. We understand that the FCA conducted an audit of Reyker’s client money and client asset provisions prior the business entering Special Administration and did not raise any considerable or grave concerns.

It is very unlikely that any money has been lost and we will welcome the completion of the account reconciliation by Smith & Williamson for absolute certainty. There will be costs associated with the administration such as Smith & Williamson’s fees but representatives from the Financial Services Compensation Scheme confirmed during the Creditors Committee Meeting in December 2019 that all retail clients will be fully covered.

We had previously discussed with the Special Administrators the possibility of them raising an FSCS claim collectively on behalf of all retail clients so they can deal with the FSCS directly in recovering their costs. This would mean that client portfolios would remain untouched and clients would not need to individually make a claim to the FSCS. This has subsequently been confirmed as the approach that the FSCS will take, which should make the process quicker and smoother.

No. Neither Unicorn nor WM Capital Management holds client money. Unicorn and WM Capital Management are the Investment Advisor and Discretionary Investment Manager respectively for the service. Reyker were a custodian responsible for the administration and holding client money and assets for a wide range of clients, including those invested in the Unicorn AIM IHT & ISA Portfolio Service. The depositary used by Reyker for the custodian services was NatWest Bank Plc.

No. At the current time, no withdrawals or transfers of client money or assets are being processed to ensure that all clients are treated equally – this includes fees for the service.

WM Capital Management, Unicorn Asset Management and LGBR Capital all agreed following Reyker entering administration to forgo their share of the Annual Management Charge fee for the period that clients are unable to access portfolios and or the portfolios cannot be traded. Smith & Williamson have since confirmed that Reyker would not be taking their share of the Annual Management Charge either.

We are reassured that Smith & Williamson, with the approval of the FCA, has stated that there is no reason to believe that there is any shortfall in client money of assets.  We would also highlight that the custodian is not in default at the current time, and that client assets are held in trust by the custodian.

Reyker, under the supervision of the FCA, continues to hold and safeguard client money and custody assets. Client cash funds processed by Reyker are held at NatWest bank in a segregated client trust account.

Smith & Williamson have received bids from prospective buyers of Reyker’s business. We expect them to make a decision by the end of January 2020. Details of the process and timeline of events thereafter is included under the section titled ‘What was the outcome of the Reyker Creditors’ Meeting on 16th December 2019?

Since Reyker entered administration in October 2019, one of the investee companies in the Income portfolio (Murgitroyd Group Plc) has been acquired by another company for cash consideration. Therefore, this stock has been replaced for clients invested other providers (e.g. Standard Life, Transact) which are unaffected by the Reyker issues. Please note that we are unable to make this change for clients invested via Reyker and sales proceeds from Murgitroyd will remain in cash until a time where we can submit a trade instruction. No changes have been made to the Growth portfolio holdings since Reyker went into administration.

We are awaiting confirmation from the Special Administrators but our understanding is that applications received after Reyker entered Special Administration on 7th October 2019 are being held separately. We are hoping that the Special Administrators can simply return these monies to investors but are awaiting confirmation from their legal advisors. This has been pursued on a number of occasions but we have unfortunately not received a satisfactory response from Smith & Williamson to date.

There are a small number of investors who had invested in the Service a short time before Reyker entered administration, had funds clear but had not been invested. We have already notified the advisers/intermediaries of those clients affected.

At the current time, no withdrawals or transfers of client money or assets are being processed across any and all of Reyker’s diverse client base to ensure that all clients are treated equally. As soon as we have further information, we will provide you with an update.  We are reassured that Smith & Williamson, with the approval of the FCA, has stated that there is no reason to believe that there is any shortfall in client money of assets.  We would also highlight that the custodian is not in default at the current time, and that client assets are held in trust by the custodian.

The Special Administrators have stated that there is no reason to believe that there is any shortfall in client assets or money, in which case the answer is ‘yes’.

However, the Special Administrators will legally need to carry out a full assessment of the client money and custody assets held by the firm to confirm the current position before working to release money and custody. This is expected to be completed by the end of January 2020 and to coincide with the announcement of who will be buying Reyker’s business.

We have been in regular contact with the Special Administrators to obtain updates on the situation and have also made them aware of specific issues relating to existing clients.

A creditors’ meeting was held by Reyker on Monday 16th December, during which a creditor’s & client’s committee was convened to assist the administrators in the discharge of their functions. This meeting was attended by WM Capital Management, following the submission of proxy votes from many investors in the service.

We have provide and will continue to provide communications with advisers, clients and other stakeholders in relation to this matter.

The Joint Special Administrators’ (Smith & Williamson hereafter referred to as ‘JSA’) proposals were overwhelmingly approved. Details of their proposals can be found in their previous report available here: https://smithandwilliamson.com/media/6082/jsas-proposals-and-report.pdf

During the meeting, two of the JSAs discussed a number of items included within a PowerPoint presentation. These slides are now available to view here: https://smithandwilliamson.com/media/6202/the-jsas-presentation-16-dec-2019.pdf

The key points from this meeting have been summarised below:

  • The estimated earliest date for a sale of the business to be completed, assets to be transferred to the new broker/custodian, and investors to be able to access their capital is June/July next year. This is explained in the PowerPoint slides from the meeting but in short, the key contributors to this timeframe are:
    1. The JSAs need to select a buyer for Reyker’s business (more on this below)
    2. After this, as part of the required bar date and distribution plan*, there will be a window of typically 4-6 weeks whereby creditors of Reyker can confirm/place a claim. The JSAs confirmed in the meeting that they would set up an online portal to help the smooth processing of this.
    3. Once this is completed, the plan must be submitted by the JSAs to the courts for processing, the timeframe on this depends on how quickly it is processed by the courts.
    4. Once approved, by law, a minimum of 3 months must pass before the assets are finally transferred to the receiving custodian/broker.
  • As at Monday 16th December, two parties had submitted their final offers/proposals for buying Reyker’s business by the Friday 13th December deadline. One other party had been given a small extension and was expected to submit their offer on Tuesday. The JSAs will review these and, even though they didn’t confirm a timescale to announce the successful bidder, we expect to hear something in early January. Details of the bidders were not provided during the meeting but it was confirmed that they are seeking to sell the business as a whole and bidding companies will need to be able to service Reyker’s multifaceted client base.
  • Representatives from the Financial Services Compensation Scheme (FSCS) were in attendance and were reassuring. The message continues to be that client assets are whole and the full costs of administration will be covered by the FSCS who will pay S&W directly as a bulk claim rather than clients submitting individual claim. This is what we expected to happen and saves a lot of additional time and hassle for all parties.
  • Finally, it was approved that a Client & Creditor Committee be formed for which WM Capital Management was shortlisted to be a part of. Ultimately, another corporate client had received more votes to sit on the committee. However, we were and will remain engaged with them to provide additional support where we can.


What happens next?

The JSAs aim to complete the reconciliation of all Client Assets by the middle of January 2020 at the latest.

Separately, the JSAs are reviewing the best and final offers received for Reyker’s business and expect to share details of their preferred transferee with the regulatory bodies by the end of January 2020 with a view to being able to significantly advance negotiations of the detailed contractual terms upon which those assets may be transferred this month.

In parallel, the JSAs’ are developing a bespoke client portal for the purpose of clients agreeing their final claim to Custody Assets and Client Money which will facilitate the implementation of a Bar Date and Distribution Plan and the safe transfer of Client Assets to the transferee, being a new regulated broker. Such a process remains subject to successfully concluding the aforementioned negotiations and the proposed transferee being willing and able to receive a wholesale transfer of all Client Assets.

Further detail in respect of the JSAs’ strategy and the anticipated timeframe for the transfer of Client Assets is available in the JSAs’ Proposals and the JSAs’ presentation dated 16 December 2019.

The first meeting of the Clients’ and Creditors’ Committee will be held in January 2020.

We will provide updates on meaningful developments. Customers can find more information about how they will be affected via:

Additional information and documents can be found via the JSA website at: https://smithandwilliamson.com/reyker-securities-plc/ (link is external)

If you have any further questions please call your LightTower Partners contact on 020 7071 3940 or email investor-relations@lighttowerpartners.co.uk.

WM Capital Management
WM Capital Management