Launched in 2005, the fund secured approximately £600m ($85.4m, €774m) to invest in so-called “death bonds” before it was suspended in 2011.
The suspension was prompted by statements made by the managing director of the Financial Services Authority (FSA) who described life settlement funds as high risk, toxic products that were possibly unsuitable for retail investors.
This resulted in a rush of redemptions from such funds; including EEA.
The fund resumed trading in January 2014 after the Guernsey Financial Services Commission (GFSC) approved a restructure of EEA, which divided the shares into continuing shares for those wishing to remain in the fund and run-off shares for those wanting out.
“As to whether [investors] should accept the strike price and actually sell [their] shares – that’s a more difficult decision that each investor will need to make in conjunction with [their] professional adviser, if applicable.”
In August 2015, EEA wrote to run-off shareholders to advise that it had been in discussions with Tullett Prebon Alternative Investments (TPAI) about running a secondary sale process for run-off shareholders.
TPAI will match its clients who have indicated that they wish to purchase run-off shares with EEA run-off shareholders who are looking to sell.
Investor action
The EEA Investors’ Group, an action group which represents more than 300 investors and advisers, was formed in October 2013. The group campaigned unsuccessfully against the restructure, believing it to be more in the interests of the directors than the investors.
In September 2015, the fund’s board of directors agreed to sell 188 US life insurance policies for £83.3m; of which £56.1m was expected to be distributed to run-off shareholders, who represent around 60% of all shareholders.
The move was met with criticism from the EEA Investor’s Group in December when it was announced that the redemption payments would be higher following a number of policy maturities.
The investor group said that the distribution would be far less beneficial than it appeared, especially when compared with the $900m of losses expected to be incurred by investors compared with their original investment and expected returns.
Run-off sale
In an email update on Friday; David Trinkwon, founder of the EEA Investor Group, advised run-off shareholders to register with TPAI but cautioned them to proceed carefully.
He wrote: “Registration with TPAI is non-binding but a decision to sell must be made during April 2016 when a strike price has been provided to the potential sellers by TPAI. [Investors] will then have to decide whether or not to accept the offer and commit some or all you [their] shares to the sale.”
Trinkwon added that TPAI are only permitted to deal with other regulated entities, as per the Financial Conduct Authority, and cannot deal directly with retail investors.
Direct EEA shareholders without a regulated financial adviser or other intermediary must engage one to act of their behalf. Alternatively, Charles Stanley and Walker Crips have agreed to provide an execution only service for this purpose.
Tough choices
Trinkwon wrote: “In my (non-professional) opinion [investors] should certainly register with TPAI before the [March 23rd] deadline, or be ready to contact Charles Stanley or Walker Crips when the strike price offer is made on, or around, 5th April.
“As to whether [investors] should accept the strike price and actually sell [their] shares – that’s a more difficult decision that each investor will need to make in conjunction with [their] professional adviser, if applicable.”
He further cautioned, however, that investors with claims in progress against their financial adviser, or via a compensation scheme, should check carefully about any impact the sale (no non-sale) might have on the claim outcome, bearing in mind investors’ legal obligations to mitigate or minimise their losses.
