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Funds Segregation Summary

Brite Advisers USA (Brite USA) have been steadfast in their belief that Brite USA client funds are segregated from the rest of the Brite assets, and are not included in the funds for which Interactive Brokers have had the margin loans they provided secured upon.

However, the Receivers released an update on 29th February essentially categorically refuting that claim, and reconfirming their opinion that all the Brite funds are commingled, and any claims held over the Platform funds are on an aggregate basis, regardless of which Brite entity or beneficiary that specific accounts funds may be assigned to.

The Receivers are still completing their Client AUM reconciliation, but they have given no indication that they have obtained any documentation or evidence to support the claim that some of the client funds are segregated from the rest, despite many claims made to the contrary.

Whilst there was a new Interactive Brokers (IB) account opened in June 2021, and some of the client funds were indeed transferred, mainly involving Brite USA client funds, this was not a legal separation. There are various reasons given for this, including:

  • IB debt was secured against the entirety of the IB accounts, and this fund was merely effectively a new sub fund, within the same umbrella of funds. The IB debt agreement indicates that the debt is secured against all the accounts, and there is no particular IB account that has any different status;
  • there were already issues with client funds missing when this fund was set up, so the c.10% variance possibly already fully existed prior to the new account being set up;
  • the funds transferred in were not solely Brite USA client assets, as they were transferred from a commingled account that held assets on behalf of beneficiaries located in multiple jurisdictions; and
  • the new account was also held by the Australian entity, Brite Pty, and there was no legal document to indicate that these were segregated from the other accounts.

Our Thoughts

Our opinion has always been the case that it is very unlikely that any of the funds would be segregated from each other, especially given the comments made by the Receivers in regard to the very poor administration and record keeping implemented by Brite Pty.

This could change as the investigation continues, but by all accounts, it appears that any hopes of client funds not being secured on their assets, especially for those with Brite Advisors USA, are disappearing rapidly.

For those of you in the US, this will be disappointing, as Brite Advisors USA have likely filled you with false hope, even if you may have been always sceptical, that the c.10-15% haircut that may apply to client funds would not apply to you, and you were going to receive 100% of your funds back (minus receivership expenses etc). However, this does not appear to be the case, and you are very likely to be in the same boat as all the other non-Brite USA clients.

For those of you outside the US, this is likely comforting news, ironically, as it means that you will not be penalised even further by having to take a considerably larger haircut on your funds to repay the margin loans and the other sources of the missing asset balance.

What to do now

Again, nothing much has really changed with this announcement. Our guidance is the exact same it has been since the start, which is to go through the advice process with several financial advisers, compare their advice/ongoing service, and then choose the one you want to work with going forward, and appoint them as your financial advisor on your existing investment.

That decision won’t be final, and you can always choose another adviser/route down the road, but it will mean you are as far along in the advice process as possible, and right at the front of the proverbial queue, once the funds are released back to the Pension/yourself, to move to another provider/platform.

If you have not done so already, please feel free to book in to speak with one of our advisers on the link below.

Author

Jonathan Laws

My journey at Cameron James has been exceptional. I am something of a sponge for knowledge, which has made me extremely well suited to the complexities and constantly evolving UK Pension Transfer system. This in-depth knowledge and experience of Final Salary Pension Transfers allows me to be at the very top of my game and protect my client’s best interests.

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