Savings plan firms collapseTwo structured product providers in administration

14 October 2009

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Two companies which sold investment products backed by the collapsed US bank Lehman Brothers have gone into administration.

NDF Administration (NDFA) and Defined Returns Limited (DFL), sister companies based in Hertfordshire, offered a variety of retail products to consumers including structured products backed by the failed investment bank Lehman Brothers.

Both firms are to be voluntarily wound up following a review of the structured products market by the Financial Services Authority (FSA), the full findings of which are due to be released this month.

As part of its investigation, the FSA asked NDFA and DFL to assess their financial position in relation to potential claims from consumers who had been sold investments backed by Lehman Brothers.

Compensation claims

As NDFA and DFL are now in administration, consumers who had invested in Lehman-backed products with them – either directly or though Independent Financial Advisers – may be entitled to compensation from the Financial Services Compensation Scheme (FSCS). The FSCS will decide whether to pay investors compensation based on the facts of each individual case, and says it aims to process all claims within six months of receiving them.

The firms’ joint administrators, Andrew Hosking and Martin Ellis of Grant Thornton UK LLP, will be writing to everyone who bought NDFA and DFL’s Lehman-backed products soon, advising them of what they need to do next.

In the meantime, the FSA’s Moneymadeclear website provides further information on how the NDFA and DFL’s decision to enter administration will affect the companies’ customers – whether or not they had bought structured products backed by Lehman Brothers.

James Daley, Money Editor at Which?, commented: 'It's sad to see another two structured product providers falling into administration, leaving thousands more customers uncertain about the safety of their savings. Most customers who took out these products were attracted to them by the promise of capital security, yet many will lose some or all of their investment. Consumers should be wary of any products that offer capital guarantees, and remember that if a product looks too good to be true, it often is.'