Company fails to persuade FSC to move TLP fund to cayman islands
The Isle of Man regulator has applied to court for Shepherds' four funds domiciled in the jurisdiction to be put into liquidation. PricewaterhouseCooper's Michael Simpson was appointed provisional liquidator on 6 May and a court hearing will take place on 13 June in a bid to make the appointment permanent.
When contacted by International Investment, the Isle of Man Financial Services Commission (FSC) said it could not reveal the reasons why it has applied for liquidation for the Shepherds Select, Safeguard High Security, Traded Life Policy (TLP) and Traded Endowment Policies (Tep) funds. Simpson could not be contacted as he is on holiday until 13 June. This comes after the two directors of Shepherds funds, Mike Abraham and Jeremy Leach, failed to persuade the FSC to move the TLP fund to the Cayman Islands or convert it into a closed-ended vehicle.
Abraham said: "Our stated aim is to create a closed-end fund so as to minimise costs incurred. However, in the intervening period, we have agreed that it is preferable to place the fund into the hands of administrators such that a third party can independently confirm that best practice has and is being followed."
The TLP fund has been suspended since May 2004 after the US Securities and Exchange Commission placed Mutual Benefits Corporation (MBC) into receivership and suspended its licence. The TLP fund bought between 80% and 85% of its traded life policies through MBC.
Leach said that when the FSC declined their request to move the fund to the Cayman Islands, it was left with two options. "These were to put the fund into liquidation or to convert it to a closed-end vehicle. We are not against putting the TLP fund into liquidation although we have concerns about what happens from now is in the best interests of investors."
The directors of TLP have won one of their legal battles in the US that has led to the return of $7m. This was money that was in the process of being invested when MBC was placed in receivership and brings the fund's total cash to $8.5m. They are also arguing through the US courts that Aids and non-Aids policies should be separated and therefore premiums for non-Aids policies should not be used to pay premiums for Aids policies.
Leach said: "It has been said that 54% of non-Aids policies have paid out. TLP did not hold any Aids policies and it would benefit the fund if they were separated." He added that the fund invested $43m through MBC.
However, Leach said the decision to put Shepherds Select funds into liquidation has stopped the $4m Tep fund, which closed in September 2004, from returning money to investors.
"Where we could, we have sold Tep policies to other market makers. Those Teps that we could not sell we have surrendered back to the life office but this process can take up to three months. The fund cannot redeem money to shareholders now because it has been placed into liquidation," he said.
For more information on the ex-Shepherds Cayman funds, see 'Select High Securities' story on page 5.
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