Broker's Clients Still Exposed

Sydney Morning Herald

Wednesday July 23, 2008

Colin Kruger

THE receivers for the Chimaera associate Primebroker Securities have made margin calls on Primebroker clients despite the clients' accounts being frozen since the company was put into receivership earlier this month.

"A request for payment notice has been sent by Paul Kirk and Stephen Longley, receivers and managers of Primebroker Securities Limited, on behalf of Primebroker Securities Limited on accounts that are out of margin. The notice encouraged recipients to seek independent legal and financial advice before responding," said the receivers in a prepared statement last night.

The margin call is being made on the basis that the shares originally lodged as collateral with Primebroker have declined in value since the receivers, acting on behalf of ANZ Bank which is owed $260 million, were appointed on July 4.

Primebroker clients may be liable thanks to a recent court ruling in relation to another ANZ-exposed, failed margin lender, Opes Prime. The ruling determined that the appointment of receivers is not an "event of default" which automatically leads to client accounts being netted off, and their potential exposure frozen.

The administrators of Opes are seeking clarification from the courts next month on this matter, but Primebroker's receivers have seized on the current position to make clients liable for any further losses on their accounts.

In the letter sent to Primebroker clients last week, the receivers said that if the outstanding amount is not paid by this Friday, July 25, Primebroker "will be entitled to serve you with a notice that an 'event of default' has occurred ", which means their exposure will finally be netted off.