The directors of the London-based securities broker that specializes in Russian investment has applied to a court to appoint special administrators. (iStock.com/jeremyreds)
The broker has been "significantly impacted by its dependence on transactions linked to Russia and Russian assets," the FCA said.
Sova Capital, which is regulated by the FCA and has 200 employees worldwide, provides trading and execution services that link clients to Russian markets. The wholesale broker posted assets of $.2.6 billion at the end of 2020.
Sova and Avdeev have not been specifically sanctioned by the West following Russia's invasion of Ukraine.
But British sanctions introduced over the past week prevent Russian state and private companies from raising money in Britain through securities and loans. They also limit the amount of money that Russian nationals will be able to deposit in U.K. bank accounts.
And Russian banks will soon be cut off from the SWIFT messaging system under plans announced by Britain, the U.S. and the European Union as they seek to further isolate the Russian financial system.
The court appointed David Soden, Ian Wormleighton and Stephen Browne of the Teneo group, a consultancy and insolvency specialist, as joint special administrators.
"Having considered the firm's position, the directors concluded that the firm is insolvent and applied to court to appoint Teneo as the firm's special administrators," the FCA said in a statement.
The U.K. introduced the special administration regime after the collapse of Lehman Brothers to ensure that administrators of collapsed investment firms were returning clients' assets as soon as possible.
Sova said in a statement that it is "experiencing some liquidity issues arising out of the unusual circumstances currently existing.
"The administrator appointed by the board will assist in the process of helping Sova Capital manage this difficult situation and fulfill its commitments to clients and counterparties," the broker said.
The FCA said on Thursday that the special administrators will assess the money and assets held by the firm and return this to customers. They will also work with the Financial Services Compensation Scheme, the U.K. fund that covers customers with redress of up to £85,000 ($113,000).
British institutional investors have been dropping their Russian securities holdings as sanctions piled up since the Russian invasion.
Britain's largest pension plan, the Universities Superannuation Scheme, said on Thursday that there is a clear financial and moral case for dumping its Russian assets, as it joined a growing list of funds seeking to exit the market this week following the country's invasion of Ukraine, its neighbor in Europe.
Pension plans linked to Transport for London and telecoms company BT have made similar statements this week, as have providers including Legal & General and Abrdn — formerly Standard Life Aberdeen.
--Editing by Ed Harris.
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