Spread-betting firm ordered to cease trading

Irish spread-betting firm Marketspreads has been ordered to cease trading by the Central Bank due to concern for clients’ accounts.

In a statement made yesterday, the Central Bank said that it had been working closely with the company’s current management team to address what it called “legacy financial issues”.

The suspension decision was taken over concerns of capital inadequacy and proper management of client funds at Marketspreads.

The company, however, claims that no problems exist on either of those fronts and that current management has been trying torectify actions taken by the firm’s previous owners.

Last week, the company secured a judgment against former directors Brian O’Neill and Fergus Rice relating to the diversion of €1.68m to another business; while €2.5m has been pledged to increase the firm’s capital base.

The Central Bank added that the company had filed accounts up to the end of Dec 2009, “on which the auditors are unable to express an opinion”.

“In light of this, the Central Bank considers it necessary — in the interest of the proper and orderly regulation and supervision of an investment firm, and for the protection of investors — to suspend the activities of Marketspreads,” the financial authority said.

For its part, Marketspreads — which was established three years ago via a management buyout of the Irish business of recently failed company Worldspreads — said it was disappointed with the move, adding that it was “unfair and unjustified”, resulting in “serious reputational damage”.

It is understood that the company had attempted, on Thursday, to get the High Court to overturn the Central Bank decision, ahead of a possible hearing at the Financial Services Appeals Tribunal.

“The manner and rationale of the Central Bank’s action, in suspending trading of a profitable, solvent and hugely co-operative company, is disappointing.

“We request that the bank allows us to release funds to our clients at the earliest possible juncture next week and to work with us to restore our licence to trade,” Marketspreads said yesterday, adding that it was hopeful of returning to business in the coming weeks.

The company said that a review — undertaken by professional services giant Grant Thornton — due to be delivered to the Central Bank early next week should prove that client accounts are being managed properly.

Marketspreads’ management is then scheduled to meet Gareth Murphy, director of market supervision at the Central Bank, on Thursday.