EBC Asset Management Pension and Life Assurance Trust (PDF ...

DETERMINATION NOTICE
under section 96(2)(d) of the
Pensions Act 2004 (“the Act”)
The
Pensions
Regulator
case ref:
1773/05
To:
Scheme: EBC Asset Management Pension and Life Assurance Trust
Mr Vipul Malde
Of:
To:
Of:
To:
Of:
To:
Of:
XXXXXXXXXXXX
XXXXX
XXXXXXXXXXX
Mr Rainer Christian Kahrmann
EBC Asset Management Limited
East India House
109-117 Middlesex Street
London E1 7JF
Mr Paul Rudolph Bastin
EBC Asset Management Limited
East India House
109-117 Middlesex Street
London E1 7JF
Thomas Eggar Trust Corporation Limited
Belmont House
Station Way
Crawley
West Sussex RH10 1JA
Date: 25 April 2006
TAKE NOTICE that the Pensions Regulator of Napier House, Trafalgar Place,
Brighton BN1 4DW (“The Regulator”) has made a determination on
19 April 2006
1. Determination
1.1 The Pensions Regulator is to determine whether an independent trustee should be
appointed to this scheme to secure the proper use or application of the assets of
the scheme.
1.2
The application was granted.
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2. Procedure Followed: Standard
2.1 By its Warning Notice dated 4 April 2006 (“the Warning Notice”) the Pensions
Regulator gave notice that it proposed to take the above action pursuant to the
application of the Regulator.
2.2 The Regulator determined that the following parties are directly affected by this
determination:
1. Mr Vipul Malde In his role as a trustee of the EBC Asset
Management Pension and Life Assurance Trust
2. Mr Rainer Christian
Kahrmann
3. Mr Paul Rudolph
Bastin
In his role as a trustee of the EBC Asset
Management Pension and Life Assurance Trust
and sole direction of EBC Asset Management
Limited, the principal employer of the scheme
In his role as a trustee of the RBC Asset
Management Pension and Life Assurance Trust
(collectively referred to as “the directly affected parties”)
These directly affected parties were entitled to make representations to the
Pensions Regulator about the determination.
2.3 Following the issue of the Warning Notice WgS Solicitors, on behalf of the trustees
exercised their right to make representations to the Pensions Regulator.
2.4 The Pensions Regulator has taken those representations into account and has
considered those materials carefully but has nevertheless determined to take the
action as detailed in 6 below for the reasons set out below:
3 Relevant Statutory Provisions/Legislation
Section 7(3)(c) of the Pensions Act 1995 – Appointment of trustees
7(3)(c)
The Authority may by order appoint a trustee of a trust scheme where they are
satisfied that it is necessary to do so in orderto
secure the proper use or application of the assets of the scheme.
8 Appointment of trustees: consequences
(1) An order under section 7 appointing a trustee may provide for any fees and
expenses of trustees appointed under the order to be paid-
(a) by the employer,
(b) out of the resources of the scheme, or
(c) partly by the employer and partly out of those resources.
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(2) Such an order may also provide that an amount equal to the amount (if any)
paid out of the resources of the scheme by virtue of subsection (1)(b) or (c) is
to be treated for all purposes as a debt due from the employer to the trustees
of the scheme.
(3) Such an order may make provision-
(a) For restricting the powers or duties of a trustee so appointed,
(b) For powers or duties to be exercisable by a trustee so appointed to the
exclusion of other trustees.
Section 100 - Duty to have regard to interests of members etc
(1) The Regulator must have regard to the matters mentioned in subsection (2) –
(a) when determining whether to exercise a regulatory function –
(i) in a case where the requirements of the standard or special
procedure apply, or
(ii) on a review under section 99, and
(b) when exercising the regulatory function in question.
(2) Those matters are –
(a) the interests of the generality of the members of the scheme to which
the exercise of the function relates, and
(b) the interests of such persons as appear to the Regulator to be directly
affected by the exercise.
4. Relevant Guidance
Power to be used
The Regulator may appoint an independent trustee to the scheme under section
7(3)(c) of the Pensions Act 1995 where they are satisfied that it is necessary to do
so in order to secure the proper use or application of the scheme assets of the
scheme. An order under section 7 appointing a trustee may provide that any fees
or expenses of the trustees appointed under the order are to be paid (a) by the
employer, (b) out of resources of the scheme and (c) partly by the employer and
partly out of those resources, it may also provide that an amount which has been
paid out of the resources of the scheme can be treated as a debt on the employer.
Further, the order can provide that the powers or duties of the appointed trustee
are to be exercisable by that trustee to the exclusion of other trustees.
5. Background to the Application
1. The EBC Asset Management Pension and Life Assurance Trust was
established on 1 June 1990 by way of an interim trust deed.
2. As at 4 April 2006 there were three scheme trustees all holding senior
positions in the employer company. They were:
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• Mr Rainer Christian Kahrmann, Chairman and sole director of EBC Asset
Management Limited
• Mr Paul Bastin, Chief Executive of EBC Asset Management Limited
• Mr Vipul Malde, Chief Accountant, Company Secretary and Personnel
Manager of EBC Asset Management Limited
3. Mr Karhrmann is the largest single beneficiary of the scheme. He is also the
majority shareholder of the employer company (51%).
4. XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXX.
5. On 4 July 2005 Mr Vipul Malde, trustee of the scheme, wrote to the Pensions
Regulator stating that under the schedule of contributions in respect of the
scheme year to 31 May 2005, EBC Asset Management Limited (EBC), was
required to pay £108,000 to the Scheme and EBC but had not paid the full
amount required and that £78,000 remained outstanding as at 31 May 2005.
(£30,000 was in fact repaid to the scheme by EBC on 20 June 2005.)
6. Mr Malde explained in this letter that on 20 June 2005, Mr Kahrmann in his
capacity as the Director of the principal employer had affirmed that EBC would
make good the shortfall in 3 instalments: £25,000 by 30 June 2005; £25,000
by mid July and the balance of £28,000 by end July 2005. These payments
were not made.
7. Mr Malde was advised by the scheme actuary that the non payment of these
contributions was not reportable until they had been outstanding for 90 days
after the due date (29 August 2005) unless Mr Malde believed that the non
payment was symptomatic of a more serious or widespread problem relating
to the company, for instance if the employer was delaying payment to alleviate
cash flow problems.
8. Under the heading ‘EBC’s recent position’ Mr Malde, in the same letter, stated
“in my opinion the non-payment is symptomatic of a wider problem” and
gave a history of EBC’s financial circumstances and highlighted financial
problems within the company.
9. On 22 August 2005 Mr Malde informed the Pensions Regulator that the:
i. principal employer had paid a further £7,500 to the Scheme on 12 July
2005, leaving a shortfall of £70,500 outstanding in respect of year ended 31
May 2005;
ii. total assets of the Scheme stood at £2,939,000 and that the Scheme
actuary as at 1 March 2005 had calculated that the approximate buyout
costs of securing all members’ benefits was £5,376,000, based on a wind
up position should the employer cease to sponsor the scheme, giving an
estimated deficit on buy out basis of £2,437,000;
iii. a transfer value for Mr XXXXXXXX had been quoted and the member had
accepted the quotation on 17 August 2005. The amount of the transfer
value was £486,937 and represented approximately 16% of the scheme
assets. The guarantee date was 17 May 2005 and payment was due to
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made by 17 November 2005.
9. On 7 October 2005 Mr Malde stated to the Regulator by telephone that he
was no longer attending work as he had not been paid his full wages for 2
months.
10. On 10 October 2005 the Pensions Regulator wrote to Mr Malde as
representatives of the trustees stating that in light of the principal employer’s
financial position; the outstanding contributions due to the Scheme and the
deficit within the Scheme, the Pensions Regulator did not feel that it would be
in all the members’ best interests to allow the full transfer value of
£486,937.99 to be paid out. The Pensions Regulator was of the opinion that
to pay out 16% of the total scheme assets to one member when the financial
position of the principal employer was in doubt could be detrimental to the
remaining members and that the trustees should consider applying to the
Regulator for an extension of time, permitted for payment of the cash
equivalent transfer value, whilst investigations took place into EBC’s financial
position.
11. On 11 October 2005 Mr Malde telephoned the Regulator stating that
Mr Kahrmann was issuing post dated cheques for national insurance due from
EBC and that wages were not being paid in full.
12. On 14 December 2005 a letter was issued to Mr Kahrmann at EBC from the
Regulator, requesting confirmation of when outstanding contributions to the
scheme would be paid; what action was being taken to deal with his conflict
of interests as trustee of the Scheme and director of EBC in light of the money
owed to the Scheme; details of EBC’s financial position and what action was
being taken by EBC to meaningfully support the Scheme going forward. A
deadline of 29 December 2005 was set for a response to be received. No
response was received by that date.
13. On 3 January 2006 a reminder was sent to Mr Kahrmann requesting a
response to the Pension Regulator’s letter of 14 December 2005.
14. On 5 January 2006 Mr Kahrmann wrote to the Pensions Regulator stating that
EBC owes £72,560 to the Scheme and that a sale of an EBC asset had fallen
through but that he was confident that the money could be found within the
next 21 days and requested an extension until 27 January 2006 to respond to
the Pensions Regulator’s letter dated 14 December 2005.
15. On 16 January 2006, the Pensions Regulator wrote to Mr Karhmann stating
that a full response would be required no later than 31 January 2006 or further
action might be considered.
16. On 30 January 2006 Mr Kahrmann responded to the Pensions Regulator and
confirmed that the outstanding contributions of £72,560 would be paid to the
scheme on 31 January 2006.
17. On 6 March 2006 the Pensions Regulator made enquiries with the trustee of
the scheme Mr V Malde to confirm that the outstanding contributions had been
received into the scheme. Mr Malde confirmed that the outstanding
contributions had not been received into the scheme on 31 January 2006 and
that as far as he was aware they remained outstanding as at 6 March 2006.
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18. On 10 April 2006 a letter was received from WgS Solicitors in response to the
Warning Notice issued stating that they are acting on behalf of the Trust and
requesting an extension to the response deadline to 19 April 2006. The letter
stated that they were aware that the matter related to a potential deficit at the
Trust which they anticipated being able to demonstrate would be rectified
promptly.
19. On 11 April 2006 an email was sent to WgS Solicitors stating that no
extension to 19 April 2006 would be given for further comment as the Panel
was due to meet on that date and needed time to consider the facts of the
case and any responses. It was explained that the Pensions Regulator felt
that it would be detrimental to the scheme to delay matters any further and
that it was essential that the case was heard on the 19 th April. It was
explained that matters regarding the deficit and it being rectified promptly
would not materially affect the facts of the case as there were other issues
that the Panel were being asked to consider and the Pensions Regulator
would not consider withdrawing the application if it could be demonstrated that
the deficit could be cleared promptly. These issues supported the decision
not to allow an extension to the 19 th April requested by WgS Solicitors. The
Solicitor was advised of the opportunity to make a reference to the Pensions
Regulator’s Tribunal should the decision taken by the Panel not be agreed
with.
20. On 11 April 2006 a fax was received from Vipal Malde on behalf of the
trustees of the scheme confirming that a sum of £72,560 had been received
into the scheme with 11 April 2006 value date.
21. On 11 April 2006, the Pensions Regulator agreed to allow WgS solicitors until
Tuesday 18 April to provide further comments to the Warning Notice.
22. A response was received from WgS Solicitors on the afternoon of Tuesday 18
April and this was duly considered by the Determinations Panel.
6. Facts and Matters Relied Upon
A preliminary point was addressed in relation to the comment from WgS that the
time limit imposed by the Regulator for a response to the Warning Notice was
unreasonable. The panel considered that there had been no failure by the
Regulator to comply with either statutory timescale requirements or any set down
in their own procedures and that given the additional time allowed to the solicitors
for a response, the requirement was not unreasonable.
6.1 All 3 trustees hold senior positions within EBC and they therefore suffer from a
potential conflict of interests. In particular, Mr Kahrmann is trustee of the
scheme, sole director of EBC and owns 51% of the shares of EBC. He is the
sole revenue generator for EBC and has sole discretion over how such
revenues are applied.
6.2 The panel considered that, on the evidence, the employer’s covenant was
weak, particularly taking into account the information given by one of the
trustees – Mr V Malde. If the employer covenant is weak and its ability to
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support the scheme is in doubt, then consideration needed to be given as to
whether it is in the interests of the generality of the members to wind up the
scheme to ensure the fairest division of assets.
6.3 The Panel did not consider that the response from WgS had provided
sufficient detailed and specific evidence to satisfy them that the company
covenant would improve.
6.4 An independent trustee would be better able to assess the financial position of
EBC and the future of the scheme, whether it ought to be wound up and how
that might be achieved, and in order to pursue the outstanding contributions
currently owed to the scheme by EBC.
7. Conclusion: Details of Determination
1. Thomas Eggar Trust Corporation Limited of Belmont House, Station Way,
Crawley, West Sussex RH10 1JA is hereby appointed as trustee of the EBC
Asset Management Pension and Life Assurance Trust with effect on and from
19 April 2006.
2. This order is made because the Pensions Regulator is satisfied that it is
necessary to do so in order to secure the proper use or application of the
assets of the scheme pursuant to section 7(3)(c) of the Pensions Act 1995.
3. The powers and duties exercisable by Thomas Eggar Trust Corporation
Limited shall be to the exclusion of all other trustees of the scheme pursuant
to section 8(4)(b) of the Pensions Act 1995.
4. The appointed trustee’s fees and expenses shall be paid by the employer
pursuant to section 8(1)(a) of the Pensions Act 1995 as amended by section
35 of the Pensions Act 2004, and those fees and expenses shall be deemed
to be a debt due from the employer to the trustee pursuant to sections 8(1)(b)
and 8(2) of the Pensions Act 1995 as amended by section 35 of the Pensions
Act 2004.
5. This order:
a. will take immediate effect on the date of this order
b. may be terminated at the expiration of 28 days notice from the Pensions
Regulator to the trustees, pursuant to section 7(5)(c) of the Pensions Act
1995.
8. Decision Maker
The determination which gave rise to the obligation to give this Determination
Notice was made by the Determinations Panel.
9. Scheme details
Name of scheme
Type of scheme
Status of scheme
EBC Asset Management Pension and Life Assurance Trust
Defined benefit
Open
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9. Scheme details
Membership
8 active members
Size of fund £2,939,00 as at 1 March 2005
Contracted in/out
Contracted out
10. Scheme trustees
Name Period of office Status of trustee
1. Vipul Malde 1.06.90 – present date individual
2. Rainer Christian Kahrmann 20.05.92 – present date individual
3. Paul Rudolph Bastin 18.10.93 – present date individual
11. Scheme advisers
Type Name Period of office Company
1. Scheme actuary David Watson unknown Scottish Widows plc
12. Employer details
Name
Address
EBC Asset Management Limited
East India House
109-117 Middlesex Street
London E1 7JF
Nature of business
Financial
Number of employees 6
Company Registered
Number
Current Status
If dissolved enter date
of dissolution
01971681
active
Not applicable
13. Important Notices
This Determination Notice is given to you under sections 96(2)(d) of the Act. The
following statutory rights are important.
14. Referral to the Pensions Regulator Tribunal
14.1 You have the right to refer the matter to which this Determination Notice relates to
the Pensions Regulator Tribunal (“the Tribunal”). Under section 103(1)(b) of the
Act you have 28 days from the date this Determination Notice is sent to you to
refer the matter to the Tribunal or such other period as specified in the Tribunal
rules or as the Tribunal may allow. A reference to the Tribunal is made by way of
a written notice signed by you and filed with a copy of this Determination Notice.
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The Tribunal’s address is: 15-19 Bedford Avenue, London WC1B 3AS (tel: 020
7612 9649). The detailed procedures for making a reference to the Tribunal are
contained in section 103 of the Act and the Tribunal Rules.
14.2
You should note that the Tribunal rules provide that at the same time as filing a
reference notice with the Tribunal, you must send a copy of the reference notice to
The Pensions Regulator. Any copy reference notice should be sent to
Determinations Support at The Pensions Regulator, Napier House, Trafalgar
Place, Brighton BN1 4DW.
Signed: John Scampion .........................
Chairman: John Scampion ...........................
Date: 25 April 2006.................................
DM No: 524262
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