Two companies that provided various structured financial products supported by Lehman Brothers, have gone into
administration. NDF Administration and Defined Returns Ltd are both situated in St Albans, Hertfordshire, and together have 35,000 customers, 10% of which had purchased Lehman-supported products.
According to the administrators, Andrew Hosking and Martin Ellis at Grant Thornton, Lehman's downfall in 2008 could have led to claims from NDF and DRL customers who purchased those products. So rather than risk possible payouts to customers who had lost cash, the companies decided to enter administration.
Concerns had also been raised that NDF and DRL's marketing literature did not properly explain the risks to investors, prior to the move.
Affected customers may be entitled to as much as £48,000 of compensation under the Financial Services Compensation Scheme. The majority of investors had bought "fixed growth plans" on the understanding that their capital was secure and would be returned even if the stock market should collapse.
The FSA has begun a clamp down on the market after discovering "serious issues" with structured product providers, and announcing recently that it would take action against such groups. Complaints about Lehman-backed structured products had almost doubled since May.
