The various stakeholders caught up in the Axiom Legal Financing
Fund fiasco show no signs of agreeing a route forward any time soon, but last
week saw the Cayman Islands Monetary Authority (“CIMA”) taking a visible role
for the first time.
The Fund’s directors believe that the fund should be put into
receivership, and would prefer KPMG to carry out that function.
These plans are opposed by Tangerine Investment Management (“TIM”)
- the company which was sacked as the fund’s manager last year, following
serious allegations of mismanagement and possible fraud – who do not want the
fund to be wound up at all, but to be allowed to trade out of its present difficulties.
The
beleaguered investors (or at least some of them) are believed to have been
convinced by the directors that receivership is the most appropriate course, but
disagree as to who should conduct the receivership, favouring Grant Thornton over
KMPG due to perceived conflicts of interest relating to KPMG.
Taylor Moor, who promoted that fund, have vocally lobbied for it
being liquidated rather than being put into receivership, in the belief that a
liquidator will have greater flexibility and will be better placed to investigate
what has gone wrong with the fund to bring it to such a sorry current state,
but agree with the other investors that Grant Thornton are best placed to take
the role.
In the meantime, City Equities Limited (“CEL”), an FSA regulated
company who has no official standing in the situation at all, is calling on the
fund’s investors not to wind up the fund, but instead to allow CEL to take over
its investment management function, in the belief that it can make a success of
the business. An optimistic view in the
circumstances one might think, but they are reported to be offering to pull off
this feat of management brilliance by charging significantly lower fees than the
fund was hitherto bearing. But the plot thickens further. CEL is reported to be owned by BVI company
Otterswick Limited, which also owns TIM, and both companies are represented by
BVI law firm, Forbes Hare. Although the
beneficial ownership of the companies involved is not a matter of public
record, it is hard to avoid the conclusion that they are all owned by the same
individual(s) – in all probability Tim Schools, who is himself facing investigation
by the Solicitors Regulation Authority in the UK.
After months of public silence on the matter from CIMA, the Cayman
regulator has finally put its head above the parapet and taken a stance in the
sorry saga, saying that it will oppose CEL’s bid to take over management of the
fund because of the perceived conflict of interest, but that it has no
objection to the appointment of Grant Thornton as receiver. It is difficult to see how CIMA could possibly
support CEL’s bid in the circumstances.
The hearing of the application took place on 31 January 2013 and 1
February 2013, but the judge has reserved judgment for the time being and so
investors will have to wait a little longer before they learn the outcome of
their fund’s future.