The Insolvency and Companies Court has given directions at the request of the liquidators of Allied Wallets Limited, a failed payment services firm, which was subject to the PSRs in respect of electronic payment processing and the EMRs in respect of pre-paid card business.
The question (which has previously also been considered by the courts), related to the safeguarding requirements of the PSRs and EMRs.
FCA had applied for the firm to be wound up as it had concerns that the firm appeared to have been mixing funds received from merchants and card issuers with its own funds. The liquidators applied for directions as to whether, on receiving “Relevant Funds” under Reg 20 EMR and Reg 23 PSR the relevant regulations created a statutory trust of funds and
- if they did create a statutory trust, is there an obligation to reconstitute the monies that should have been in it; and
- if they did not create a statutory trust, how should the asset pool arising under the regulations be applied when there is a shortfall against creditor claims
In the Ipagoo case, previously reported in FIN, the Court of Appeal confirmed that the EMR do not create a statutory trust, and that e-money holders have an interest in the asset pool that ranks ahead of unsecured creditors and ahead of the costs of the liquidation apart from the costs of distributing the asset pool. Moreover, the asset pool should include both funds that actually were safeguarded as well as ones that should have been but were not.
The Court in the Allied Wallets case held that the Ipagoo reasoning concerning the EMR would apply equally to the PSR, and so needed to consider only issues additionally raised by Allied Wallets’ liquidators.