Nearly $60 million in customer money mixed up at collapsed broker

Source

Administrators picking through the wreckage of one of the country's largest online broking houses Halifax Investment Services, have found that $57 million in money invested by clients has been mixed up with funds belonging to the company.

Halifax collapsed before Christmas, freezing $210 million invested by its 12,000 plus clients as Ferrier Hodgson was brought in by the company to review its books and records.

Administrators are trying to figure out how and why the funds were "co-mingled".

Administrators are trying to figure out how and why the funds were "co-mingled". Credit:Jessica Shaprio

The collapse is so large, administrators liken it to high profile stockbroker collapses including Opes Prime, BBY and Sonray. Ferrier Hodgson is also trying to pinpoint the amount of investor funds that has gone missing.

The administrators said they had located around $185 million of the $210 million of investor funds.

Ferrrier Hodgson partner Morgan Kelly said the administrators had recently increased their estimate, saying the shortfall of funds could top $25 million, compared to an earlier prediction that between $15 million and $20 million of investor money was gone.

Halifax's problems with having a shortfall of investor funds began at least two years ago, according to administrators.

"Investor funds have been co-mingled in such a way that the taint affects the claims of all investors on all three platforms in both the Australian and New Zealand businesses," Mr Kelly said.

"The process of allocating and tracing individual investor funds will likely be a complex and lengthy process."

The mixing of investments, or "co-mingling" of funds, can be a serious breach of companies law.

"We’re working closely with ASIC on all aspects of the investigation," Mr Kelly said.

We’re working closely with ASIC on all aspects of the investigation.

Ferrier Hodgson's Morgan Kelly

Hallifax operated and offered three trading platforms -- Interactive Brokers, MetaTrader 4 and the MetaTrader 5 platforms. Interactive Brokers, which has a stockbroking licence, is a third party online trading platform that provides a white label product to Halifax.

The platforms allowed Halifax's clients to invest in a range of products and equities foreign exchange derivatives, equity derivatives and indexed contracts for difference.

The majority of the client funds lie with Interactive Brokers - with $110 million on the platform in Australia and a further $44 million in the platform in New Zealand. The remainder was invested in the MT4 and MT5 platforms.

Jeff Worboys, the former director of Halifax Investment Services.

Jeff Worboys, the former director of Halifax Investment Services.

“We have been considering strategies for the timely return of investor funds, the options are currently a Deed of Company Arrangement or placing Halifax into liquidation," Mr Kelly said.

Halifax's sole director at the time of its collapse was Gold Coast businessman Jeff Worboys. The group had offices in Sydney, Melbourne, Auckland and the Gold Coast.

Only the Auckland and Sydney offices remain open.

Minutes of a meeting of committee of creditors reveal that it is unlikely Mr Worboys will propose a Deed of Company Arrangement (DOCA).

The administrators have also been in discussions with Andrew Gibbs, the director of Halifax's New Zealand arm, about a potential DOCA.

The corporate watchdog suspended the financial licence of Halifax in January after discussions with administrators. Investors will still be able close out their trades despite the suspension.

Halifax was the subject of an enforceable undertaking with ASIC in 2013 following regulatory action by the Australian Securities and Investments Commission (ASIC) over a slew of concerns about the operations of the business.