Mr. Matthew Elderfield:

I must also observe section 33A(k) and the other legislative provisions governing what I do. It was very frustrating because it was like a false premise for our decision making. If we had known of the fraud we would have taken a different course but fraud is difficult to identify. That was one problem in hindsight. The second problem is that we only had the nuclear option of liquidation. We do not have the ability to put investment firms into administration. This is a gap in the law. We would have preferred to appoint an administrator, clear out the management entirely and have the administrator run the organisation. All we could do was work with the management until we could sell the operation or liquidate it but liquidation would have crystalised losses for the customers.

Due diligence was also required during the sales process. Off the top of my head, four or five counterparties came through but none spotted the client asset hole. It was just before settlement of the deal that Appian finally spotted it. We published our lessons learned and were quite open about them. We learned lessons about how we should approach these matters. It is important to have a low risk tolerance about handling client assets. We tightened up in that regard. We have a dedicated client assets team and put a protocol in place for problems with client assets. We intervened with a spreads company at the beginning of last year to ensure everything was in proper order and have done some other interventions which required the use of third parties to get the management of client assets out of the firms in question. There are lessons for us and the auditors in the way the matter unfolded.