22 Oct 2013: FSD warning helps MF Global scheme buyout
TPR has issued a ‘section 89’ report setting out its involvement in helping the trustees of MF Global’s UK scheme achieve a buyout.

MF Global was a US-based broker-dealer business which filed for Chapter 11 bankruptcy protection in the US on 31 October 2011.  The sponsor of the UK Scheme, MF Global UK Services Limited, which provided employee and pension services for the UK operations of the MF Global group, went into administration on the same date.  As a result the scheme entered the PPF assessment period.

Shortly after the Group’s insolvency, the Regulator began an investigation to determine whether it would be appropriate to issue a Financial Support Direction (FSD) against another Group company in the UK. The regulator worked closely with the scheme trustees to finalise a ‘warning notice’ making the case for an FSD, which it intended to issue by 30 October this year.

In parallel, the trustees of the scheme entered into discussions with the administrators and on 16 October accepted a sum of money sufficient to buy out members’ benefits with an insurance company at a ‘broadly similar´ level to those promised prior the sponsor’s administration.

The Regulator will now not proceed with regulatory action and the scheme will wind up outside the PPF.

Argyll comment:  this looks like a text book example of TPR’s moral hazard powers (or at least the threat of them) working in practice.  The only employer was a service company and appears to have been ‘insufficiently resourced’ as defined in legislation.  The Regulator would also have satisfied itself that an FSD would have been reasonable, for example if the other the benefit derived from the employer by the other subsidiary.

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