Distress and Insolvency in the Payment Systems and Foreign Exchange Sector – what does it mean for your business?

Argentex LLP (“Argentex”), a high-profile foreign exchange (“FX”) provider, recently entered special administration under the Payment and Electronic Money Institution Insolvency Regulations 2021 (“PEMIIR”) following well-publicised liquidity issues caused by recent fluctuations in global currency markets. 

Trading in Argentex was abruptly suspended on 17 July 2025, effectively freezing the company’s ability to take on new customer funds and ceasing all onward trade obligations. Joint special administrators (“JSAs”) from FRP Advisory were appointed on 21 July 2025. 

All e-money or providers of regulated payment services (such as money remittance or safeguarding client funds) in the UK must be authorised as an Electronic Money Institution (“EMI”) or Payment Institution (“PI”) by the Financial Conduct Authority (“FCA”). Based on recent FCA figures, there are approximately 1600 EMIs and PIs currently operating in the UK, of which a number have suffered financial difficulties in recent years.

FX providers do not automatically fall into the payment or e-money categories just because it offers FX services. However, given Argentex was responsible for handling client monies and providing onward payment services, it was FCA regulated and falls into the definition of an EMI.

Numerous different types of business utilise EMI and PIs every day, in particular for FX services, which may be used in practice to hedge against exchange rate volatility when carrying out cross-border transactions. As such, it is not just financial institutions who are impacted by distress in this sector, and any corporate carrying out (for example) cross-border sales are at risk if their FX provider becomes insolvent and/or enters a formal insolvency procedure.

The PEMIIR are a relatively new form of special administration, and Argentex may offer fresh insight into how the PEMIIR regime is applied. But what does it mean for clients and creditors?

The PEMIIR: An Introduction

The PEMIIR and the accompanying Payment and Electronic Money Institution Insolvency (England and Wales) Rules 2021 (the “Rules”) came into force in the latter half of 2021. They were introduced to address a perceived lacuna in the existing insolvency framework, and adopt a number of similar concepts and principles to other forms of special administration in the financial services sector (such as the special administration regime for investment banks). 

The PEMIIR established a special administration regime, under which any JSA appointed is tasked with achieving each of the three administration objectives (in the following order of priority):

1. returning relevant funds to customers as soon as reasonably practicable;
2. engaging with financial authorities and infrastructure providers; and
3. either rescuing the institution as a going concern or winding it up in the best interests of creditors

Unlike an “ordinary” administration under Schedule B1 of the Insolvency Act 1986, the PEMIIR prioritises customer protection above all other considerations, including the interests of creditors as a whole. A JSA appointed under the PEMIIR is obliged to reconcile all funds held in the entity and determine what funds should be ring-fenced as customer funds as soon as possible after their appointment. Whilst technically such funds should have been safeguarded prior to the administration, in practice, a number of recent cases demonstrate that this is not always the position. 

Following their appointment, the JSAs will invite all parties owed money by the insolvent company to submit their claims, usually by a formal “bar date”. Once the bar date has passed, the JSAs will determine the extent of any shortfall to customers, and if there is such a shortfall, propose a “Distribution Plan” whereby the safeguarded asset pool is distributed to qualifying customers on a pro-rata basis.  

Distribution Plans – a recent example

The recent case of Re Rational Foreign Exchange Limited [2025] EWHC 1958 (Ch) published on 28 July 2025 provides an illustration of how this process can work in practice. The High Court approved a distribution plan to return safeguarded funds to customers following the collapse of the FX firm. The JSAs faced challenges reconciling accounts due to poor records and complex fund flows. It is notable in this case that the process took 18 months from the appointment of the JSAs to the approval of the distribution plan, with customers expected to recover just 7.7p/£ against their claims. Creditors without claims to safeguarded funds - such as those for unpaid invoices or margin deposits - remain unsecured and will receive no distribution.

Conclusion and Outlook

Argentex’s entry into special administration under the PEMIIR regime presents another opportunity to observe how this relatively new framework operates in practice. As seen in Re Rational Foreign Exchange Limited, the distinction between customers and creditors remains central to the outcome of such proceedings, with significant implications for recovery prospects. 

It is too early to say in the case of Argentex how the process will unfold, and the JSAs have not yet published their proposals for return of customer funds or likely timings. Affected parties should be encouraged to contact the JSAs to register their initial claims as soon as possible and await further updates. 

HM Treasury has recently launched a review of the PEMIIR, with interim findings due in September and a final report by year-end, which will assess the regime’s effectiveness and need for reform. Some initial responses (such as this from UK Finance, a trade body for the financial services sector) have indicated there is some frustration with the PEMIIR and its effectiveness, with complaints that the PEMIIR has not achieved its objectives of accelerating the return of funds to customers of failed institutions and that the regulations are too complex and prescriptive, meaning processes are taking too long to come to a conclusion. 

If you are a corporate affected by an insolvent FX or other electronic payment provider, please see the following key practical points to consider:

• Map your exposure: consider what balances may be held by the provider, or what payments in flight on open FX deals, and any back‑to‑back hedges with your banks
• Evidence your claim: gather contracts, account statements, confirmation that funds were paid (or intended to be paid) into designated safeguarded accounts
• Keep operations moving: switch critical payment flows to an alternative provider and notify counterparties of any expected payment delays
• Register promptly with the JSAs and monitor the case page for key bar date and portal details
• Be aware shortfalls are possible: even where funds are “safeguarded,” reconciliation can reveal gaps and recoveries may be net of costs and less than 100%
• Beware of scams: do not respond to cold calls or pay “claims handlers”; use official JSA contacts and the FCA’s links