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SCMP Reporter

THE administrator of beleaguered foreign exchange trader Canwell Forex International will ask creditors how to finance the costly court case.

The Securities and Futures Commission (SFC), which regulates foreign exchange traders, said initial court judgment disallowed the application that the $32 million assets be released to cover legal fees.

 The SFC went to court last month to challenge Silver Bound's charge on the only asset of Canwell, a $32 million bank deposit.

 To finance the cost of the legal action, the regulator applied to use the deposits but was rejected.

 The administrator and the SFC have yet to decide on the next move.

 'A meeting will be convened to see if the creditors want to finance the court case themselves,' said SFC deputy chairman Michael Wu.

 The case has so far cost about $1.3 million, carried by the SFC.

 'Another million will have to be spent before the case comes to an end,' Mr Wu said.

 It is not sure if the SFC will continue to finance the legal action through its own resources.

  Canwell incurred client liabilities of $15 million, including $2 million of client funds.

 Mr Wu said even if the case were lost, the SFC might recover some of the expenses through another channel.

 'Canwell should have $30 million in capital. We can try to track down that sum.' He said the case had been referred to the police for action because of the fraud element involved.

 The investigation was triggered by a complaint from a Canwell client in October last year.

 It was then discovered that Canwell's books and records were not in order and it had been furnishing inaccurate financial returns to the SFC.

 Since then, the SFC has tightened the vetting and auditing process.

  The deadline for approving all leveraged foreign exchange traders has been delayed from early last month to April.

 There are eight applications for the licence of leveraged foreign exchange trader pending.

 Among them are two that are slightly under-capitalised. 'But the problem is not serious,' Mr Wu said.



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Foreign exchange market

Canwell seeks help with court costs