NDFA and DRL plunge into administration on Lehman liabilities

NDF Administration (NDFA) and Defined Returns Limited (DRL), UK structured products distributors and plan managers, have entered into administration.

The move comes at the request of their directors, and the firms announced the news in a statement released by appointed administrator Grant Thornton today.

The decision has been taken in recognition of "large contingent liabilities within the companies", the statement said. These have arisen from the distribution of structured products underwritten by Lehman Brothers, leaving the firms open to potential claims from customers.

The UK Financial Services Authority (FSA) and Financial Ombudsman are both investigating the sale of these products, with the results of the FSA's inquiry expected to be published soon.

However, NDFA and DRL were likely to have had a tip-off that they would be censured for their sales of Lehman-backed products, says one London-based independent distributor. Around 10% of their 35,000 clients were invested in structures underwritten by the failed US investment bank, administrators say.

Opal, which administers NDFA products, operates as normal and has confirmed this will continue into early 2010, says Grant Thornton. The administrators are reviewing that proper segregation procedures were in place between company and investor funds. In the meantime, no income will be paid to investors under product plans and no redemptions will be able to take place. Andy Hosking and Martin Ellis, both partners at Grant Thornton, have been appointed as joint administrators.

The news follows the FSA's enforced insolvency of Keydata Investment Services, also a plan manager and structured products distributor, in June over tax discrepancies. NDFA in particular had attracted some of Keydata's former clients for its plan management services.

For the full story and analysis, see Structured Products November issue.